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Financial Guidance and Claims Bill [HL]

Committee (2nd Day) (Continued)

Clause 2: Functions and objectives

Amendment 19

Committee (2nd Day)

Clause 3: Specific requirements as to the pensions guidance function

Amendment 42A

  1. Lord McKenzie of Luton

    Moved by

    19: Clause 2, page 2, line 32, at end insert—

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    “( ) financial inclusion,”

  2. Baroness Greengross

    Moved by

    42A: Clause 3, page 3, line 15, at end insert—

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    “( ) As part of its pensions guidance function, the single financial guidance body must provide guidance on other sources of retirement income, including housing wealth, to enable members of the public to make fully informed decisions about pensions and retirement income.”

  3. Lord McKenzie of Luton (Lab)

    My Lords, I shall also speak to our other amendments in this group, namely Amendments 22, 25 and 39. Amendment 19 adds “financial inclusion” as one of the matters which the national strategy should specifically seek to improve. Amendment 22 sets out a range of factors which the SFGB must address as part of this national strategy. Amendment 39 offers definitions of financial inclusion and financial exclusion for this purpose. Amendment 25 takes us back to issues of financial education, which we discussed at the end of our previous Committee day.

    As will be readily identified, these amendments draw heavily on the recommendations of the House of Lords Select Committee on Financial Exclusion. We acknowledge that the Government have already dealt with one of its recommendations—that there should be a clearly designated Minister for Financial Inclusion, and we support this. However, this opens the way for other recommendations of the Select Committee report to be taken forward, two in particular. These are that the Government should lead and set a clear strategy to improve financial inclusion in the UK as one aspect of a wider strategy to tackle exclusion, and that there should be an annual progress report submitted to Parliament. A Minister should have lead responsibility, but work is needed across government. The role of the SFGB in these circumstances would be to support the production of the annual report in conjunction with the devolved Administrations. This is exactly what Amendment 22 provides. However, if the Government were not minded to proceed with leading on a strategy and routine reporting, how will they take these matters forward? Can the Minister say more about when the Government will respond to the totality of the Select Committee’s report, and set out in particular what they see as their role in tackling financial exclusion and promoting financial inclusion?

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    As the report sets out, the precise use of the terms “financial exclusion” and “financial inclusion” have varied over the years, but we warmed to the approach adopted by the Select Committee, which we have set down in Amendment 39. This might be broadly characterised as financial exclusion representing the problem and financial inclusion the solution—that is, what we should seek to achieve.

    One of the objectives of the SFGB is that it must have regard to improving the ability of members of the public to make informed financial decisions. Those who struggle to do so face the risks of financial exclusion, such as the inability to access what might be considered everyday financial products and services. As we know, such individuals can face significant barriers to engagement in modern society. Hence Amendment 22 requires the SFGB, as part of its role in developing a national strategy, to work widely with financial institutions and technology companies to support hard-to-reach groups in accessing financial support and products online.

    At the same time as internet banking is growing, causing more financial services to move online, we are experiencing a programme of significant bank closures: 53% of UK bank branches closed between 1989 and 2016. It is suggested that this is a particular problem for older age groups who, we are told, place a high value on face-to-face contact, tend to be more reliant on cash and experience challenges in travelling, and one-third of people over 80 either have never used a cash machine or prefer to avoid them. Some of the high-street banks are responding to this by helping to develop the digital skills of their customers, and there is an obvious role for the SFGB in encouraging and promoting this.

    Exclusion is not only a consequence of the digital challenge. The House of Lords committee heard about the difficulties for some, such as those without a passport or driving licence, in meeting rigorous requirements for bank accounts. These matters particularly affect the homeless, ex-offenders and migrants, to name but a few. Amendment 22 also highlights some of the financial exclusion issues which affect those suffering with mental health conditions. The report describes how certain behaviours, such as,

    “disengaging … from contact with creditors and financial services providers”,

    lead to the build-up of debt and problems with credit ratings, and that,

    “excessive spending during manic episodes”,

    can also lead to the build-up of debt. It is important, therefore, that arrangements include “control options” for customers.

    However, as recent events demonstrate, the existence of control options does not guarantee provider compliance. One especially disturbing issue reported on by the Select Committee is the communication strategy pursued by some online retailers. This involves potentially “predatory behaviour” in the early hours of the morning, when lonely and isolated individuals are at their most vulnerable. This is a matter for the Government, the SFGB and others to be concerned about. Is the Minister satisfied with the current state of regulation and its implementation in this regard?

    Finally, Amendment 22 calls for a review of the impact of the Welfare Reform Act 2012 on financial inclusion. While it calls for an annual review, we accept that it might better call for, as did the committee,

    “a detailed, comprehensive cumulative impact study of how changes in social security policy resulting from the Welfare Reform Act 2012 might have adversely affected financial wellbeing and inclusion”.

    Other organisations have tried, such as the IFS and the CPAG. A recent analysis by the latter showed that under universal credit and child benefit changes since 2013, families and children have lost more than any other group, with cuts far outweighing the increased support for childcare costs. Compared with the original design of universal credit, the average family with three children will be more than £2,500 a year worse off. The point is that the changes to universal credit will be heavily poverty-producing and lack of money is a feature of financial exclusion. While an annual review to monitor changes is helpful, the cumulative effect of all components of the changes to social security shows how mean-spirited and counterproductive they have been.

    Apart from the broad thrust of the universal credit system, particular aspects of the design impact very directly on the build-up of debt, such as the seven-day waiting period, which we believe should be abolished; more flexibility on monthly payments; more choice over the recipient of housing support; and the localisation of council tax support and the Social Fund at a time when local authority funding is being dramatically reduced. These matters, together with the impact of sanctions, need to be the subject of a comprehensive research programme.

    Amendment 25 takes us back to education and, in part, to the debate we had at the end of our first Committee day. It is implied in our approach that if we are to achieve improved financial inclusion as a society—we have a long way to go—financial education is important. This amendment keeps the focus on children and young people. As far as secondary schools are concerned, we learned from evidence before the Select Committee that despite financial education being added to the national curriculum in England—the devolved nations being ahead of the game—the obligation to teach financial education applies to only 35% of state-funded secondary schools, the ones which are now maintained. Moreover, limited resources have been made available, including for teacher training. Notwithstanding this experience, we consider that the Secretary of State should be encouraged to have financial education added to the primary school education curriculum.

    Early intervention is important in many areas, no less financial education. Money Advice Service research shows that attitudes to money are typically embedded by the age of seven. Notwithstanding that the current inspection framework sets out principles rather than a focus on individual subjects, part of the framework is concerned with supporting children to make career choices, and it is considered a sufficient nexus for Ofsted to take account of financial education provided in schools, hence the amendment urging that it does.

    There is a major task here for the SFGB and we encourage the Government to support the issues we have outlined. I beg to move.

  4. Baroness Greengross (CB)

    My Lords, we all know that because of the profound changes since pension freedoms were introduced, retirement income decisions have become much more complex. From the age of 55 there are a greater number of options for using the pension pot, including taking the pension as cash, keeping the fund invested or purchasing an annuity. Accordingly, I welcome the broad drafting in this Bill of the objectives and functions of the single financial guidance body and, in particular, the recognition of provision of advice as well as guidance, and the continuation of the vital role played by the Money Advice Service in support of the financial capability strategy.

    Financial decision-making is complex and retirees must consider their long-term, not just their short-term, retirement income needs. The SFGB needs to encourage this by ensuring that consumers understand the full range of options available, including the potential role of any housing wealth. Consideration of the potential role of housing wealth is already included in the pensions advice allowance, which allows people to withdraw £500 tax-free from their pension pots on up to three occasions, to pay for financial advice on their retirement. I welcome that inclusion and think it should be extended.

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    This means that pension income and the value of housing equity are considered alongside one another. Because some people will feel unable to afford, or willing to pay for, such advice, it is crucial that free impartial guidance is available through the SFGB. The Equity Release Council’s White Paper, Equity Release Rebooted, estimates that over-55s in England possess about £1.8 trillion in housing wealth, and that is expected to double to £3.6 trillion by 2036. Meanwhile, the average value of a defined contribution pension in 2012-14 was £30,300. Research by the Equity Release Council estimates that while the average 55 to 64 year-old should have a pension pot of £123,000, they may only have an average of £30,200, indicating that a likely future need for supplementary retirement income is there, such as from housing wealth.

    I would want not to push people into equity release but to look holistically at their assets. In one important area affecting retirement assets, the FCA’s prediction means that approximately 2.6 million interest-only mortgages will reach maturity over the next 30 years, with estimates that 48% of borrowers may not have enough money to fully repay their loan. It is not surprising that statistics from the council’s spring 2017 market report indicated that the use of property wealth to fund lifestyle and health in old age is growing rapidly, and is likely to continue to grow in the coming years.

    In 2013, Demos estimated that the over-60s were holding unmortgaged housing wealth of £1.23 trillion; that figure would be significantly higher now. The Aviva Real Retirement Report suggested in 2016 that 46% of homeowners aged over 45—approximately 6 million households—see property as a key part of their retirement income planning, increasing to 58% among 45 to 54-year-olds. This is borne out by the Equity Release Council seeing a year-on-year equity release lending growth of £342 million. The average amount lent under an equity release policy during the second half of 2016 was very high, at £92,376 for lump-sum plans and £54,584 through drawdown plans, with an additional £37,751 reserved for future use.

    I share the view of Age UK and many commentators that a saver withdrawing their pension pot should receive guidance, including on housing wealth, by default. But since that is the subject of a later amendment, I shall not discuss it any further here. In summary, as part of this wider landscape of helping people to preserve their lifestyles and well-being in retirement, a consideration of the important role of housing wealth should be an explicit part of the advice envelope proffered by the new body. I hope that that might be acceptable. I beg to move.

  5. Baroness Finlay of Llandaff (CB)

    I support this amendment from my noble friend Lady Greengross because, as she has outlined, a lot of people have the majority of their wealth tied up in their property. The current equity release schemes are much more flexible than they used to be and contain a variety of safeguards. The Equity Release Council’s statement of principle, by which all the council members must abide, mandates that all equity release customers must receive independent financial advice. Can the Minister clarify whether all equity release schemes will fall under the FCA? I understand that currently it is only those from members who are part of the Equity Release Council, which means that we will potentially have twin-track standards going on for the customer.

    The requirement for a solicitor to sign off the arrangement becomes particularly important when we look at the issues around mental capacity and coercion. When I was at the Equity Release Council’s annual meeting, I was quite shocked to hear from one person there who had been negotiating equity release with a client. She had a suspicion that something did not quite seem right and decided to visit the client without the client’s son present, at which point the client said, “I don’t really want to do this at all. My son’s pushing me to do it”. She had the sense to say, “That’s very simple. I am refusing the equity release, and I will write to you”, and she tore up the forms there and then.

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    The difficulty that we face all the time is that people get coerced and pressured by their family. There is a lot of evidence of that. It is extremely difficult to detect, and it is that one-to-one encounter with the client that gives the gut feeling that something is not quite right. When the person who is managing or selling the scheme acts on that gut feeling, they will reveal if there has been a problem. By having an independent solicitor to advise, we are building in the safeguard of somebody else looking at it, being able to assess the client and having some experience of assessing capacity for that decision at that time, which is what is required under the Mental Capacity Act. That will also allow people who are depressed or have fluctuating capacity to be detected. Somebody from the finance sector may have very little true training. Although the Equity Release Council is addressing vulnerability very well, I am concerned that in some of the schemes that are not part of the council the people dealing with them do not understand that the prerequisite for offering the product is to have separate legal representation.

    Has there been any consideration of exit charges and their appropriateness and of whether the transparency of scheme exit charges will fall under the new guidance and will therefore be transparent and comparable? There can be a problem if somebody signs up to one of these schemes, circumstances change and they wish to withdraw from the scheme; in the past they have been hit by fairly punitive exit charges. I would be concerned if that oversight is not rolled up into the new body.

  1. Baroness Coussins (CB)

    My Lords, I support the amendments in this group, particularly Amendments 19 and 22. I remind the Committee of my interest as president of the Money Advice Trust, the national charity.

    These amendments have been tabled by the noble Lord, Lord McKenzie, and therefore carry a great deal of weight given his recent experience as a member of the Financial Exclusion Committee. I was pleased to see the Government follow that committee’s recommendation for a dedicated Minister for Pensions and Financial Inclusion, creating this additional ministerial brief within the DWP. That is a very welcome step.

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    Amendments 19 and 22 offer an opportunity for building further on that, by expanding the remit of the single financial guidance body’s strategic function to include improving financial inclusion. The amendments in effect implement several of the Financial Exclusion Committee’s other recommendations, which have particular relevance to the objectives that the Bill sets out for the new body. The ministerial brief for financial inclusion within the DWP, together with that department’s role in relation to the new body, seems a perfect alignment of policy. With the right resourcing, the new body’s objectives and its expertise could equip it very well to lead on financial inclusion, so I hope very much that the Minister will be able to respond positively to these amendments.

  1. The Earl of Listowel (CB)

    My Lords, I offer my support for these amendments in considering the particular needs of young people in care and leaving care. Most young people leaving care do so by the age of 18—many are still under that age—and they have to run their financial lives. There is a duty on the local authority to provide support but many of them are plunged, too early in their lives, into the sorts of responsibilities that such education would help them to deal with more effectively. Half of children from run-of-the-mill families are still with their parents up to the age of 20, so I can see particular benefit from these amendments for vulnerable young people who may have to look after themselves very early in their lives.

  2. Baroness Kramer (LD)

    My Lords, I am strongly in favour of this amendment, which picks up on an issue addressed earlier by the noble Baroness, Lady Altmann. It is that the world we live in is far more complex than the one that provided the framework when these original bodies, which are now being brought into one, were set in place. We need that revision for this single body to encompass the whole of the arena of life as it is today.

    The noble Baroness, Lady Greengross, was very clear that for many people, the overwhelming majority of their wealth and assets is in their home, that using that as part of their support for their old age may well be a strategy they want to pursue, and that they cannot consider a pension without looking at that issue with the same kind of clarity and without looking at the situation as whole.

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    I have personal experience of this. I have an elderly family friend who is considering equity release or some similar way to use the wealth embedded in her home. I started to look at the various websites and at the products that are available. Noble Lords will be delighted to know that this is apparently the golden age of equity release, which is increasing at the rate of 28% per year. The websites are exceedingly seductive. The comparison sites compare one product to another, but none of them exposes the real issues of concern or the questions one should be asking about whether the product is appropriate. It is also easy to find a way to access that equity without being in a regulated environment. Recognising that, equity release is for some people entirely appropriate but for many it is entirely inappropriate, and advice is critical.

    If people are not signposted and sent through a guidance mechanism to get that financial advice, it seems to me they are in very murky waters. It takes a very sophisticated financial expert to work their way through this. It makes pensions look simple, and I hope very much that the Government will take on board and make use of this excellent amendment.

  3. Baroness Finlay of Llandaff (CB)

    My Lords, first, I declare my interest as chair of the National Mental Capacity Forum. I join in the comments of my noble friends Lady Coussins and Lord Listowel in welcoming the spirit of these amendments. Perhaps I may flag up, as I would be glad to have it on the record, that these amendments may not go far enough for those who have difficulty with financial issues.

    Capacity impairments are related not only to mental ill-health. They may be related to frailty and there may be fluctuating mental capacity. For a group of people with communication difficulties, since banks are closing and local branches are no longer there, there is no one with whom they can communicate. If they have speech difficulties, they certainly cannot communicate well over the phone. They may have a mobility tremor, for example, which makes it difficult for them to use the internet without assistance, yet they may want to manage their affairs with a degree of privacy, which they can do in a face-to-face consultation with somebody in a bank.

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    In addition to impaired capacity and disability issues, there is another difficulty we increasingly see, particularly among the older population: coercion, which may be from other family members and a form of elder abuse. It can be very subtle indeed. I had a meeting this morning with Building Societies Association representatives, who are certainly detecting coercion in face-to-face encounters. But I also asked them whether there is any evidence of detecting coercion in the online systems that are in place. There is none, which becomes worrying. Although this group is right on the borderline of impaired capacity, they are inhibited from exercising their capacity because they are frightened of being intimidated by others.

    Another group of concern is those with addictive behaviours such as the hypomania the noble Lord, Lord McKenzie, referred to in his opening remarks. For example, people may have a gambling addiction—a very defined addiction—and be increasingly enticed into spending more or doing a great deal of shopping during the night, when they are hypomanic. The control options on accounts should really be strengthened, so that someone can put them on but not have the ability to take them off themselves without a consultative delay period. The problem is that when they are hypomanic, they think it very reasonable to spend or gamble massively, but later they realise they did not have the capacity to do so. I hope the Government will look very favourably on these amendments and that when we come back on Report, they might even consider extending them a bit further.

  4. Lord McKenzie of Luton (Lab)

    My Lords, this is an interesting amendment. I believe that it is possible for the noble Baroness to achieve what she wants under the terms of the Bill as it stands, but that is not entirely clear and not quite for the reasons set down in the amendment. The amendment says:

    “As part of its pensions guidance function, the single financial guidance body must provide”,

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    et cetera. Clause 2(4) says that the “pensions guidance function” under Clause 2(1)(a) is,

    “to provide, to members of the public, information and guidance on matters relating to occupational and personal pensions”.

    I do not think that equity release falls within that definition. There is a separate issue as to whether it would fall within Clause 3, which says:

    “As part of its pensions guidance function, the single financial guidance body must provide information and guidance”,

    et cetera, but that is to do with,

    “flexible benefits that may be provided to the member or survivor”.

    It seems to me, on a straightforward reading of the Bill, that it would not be possible to use the pensions guidance function strand of the new body, but there seems absolutely no reason why the money guidance function could not be used for that purpose. That would be a potential quarrel I would have. The Minister may say that interpretation is too restrictive and not right, but I do not think it would preclude the noble Baroness achieving what she wants. It seems to me the money guidance function should enable guidance to be provided on assets including on equity release.

    The noble Baroness, Lady Kramer, raised the question of whether the FCA regulates all these schemes. I am advised that it probably does not, but obviously there is an issue there and perhaps the Minister would respond to that. We can support the thrust of this, because I think it achieves what the noble Baroness wants, but not quite, as I understand it, in the terms of the amendment, because of the other functions in the Bill.

  5. Baroness Kramer (LD)

    My Lords, if I may join in the general chorus, the concern that these amendments express—that the single financial guidance body is not directed to look at the issue of financial exclusion—is a serious lost opportunity. This body primarily direct channels of communication to all kinds of people about how to manage their money, whether that is in time of crisis or to maximise the opportunity for a good pension in old age, for example. As a result, it is in contact with people and is therefore aware of them in a way that, for example, a formal regulator such as the FCA can never be. Not to try to tackle the very individual and human complexities of financial exclusion seems a lost opportunity, given the palette of opportunity being created by the structure of the body. Financial exclusion matters greatly. We all know about growing inequality within our society and how it undermines the progress we wish to make. The contribution this body could make in this arena could help tip the balance in the direction in which we all hope to go.

  6. Lord Young of Cookham (Con)

    My Lords, I begin by thanking the noble Baroness, Lady Greengross, for her amendment, which seeks to add an additional requirement to Clause 3. She has a formidable reputation for campaigning on behalf of those of above average age. For as long as I have known her, she has taken a particular interest in housing, so there is a lot of force behind her amendment.

    Clause 3 specifies that as part of its pensions guidance function, the single financial guidance body must provide information and guidance to help a member of a pension scheme make decisions about the options open to them as a result of the pension freedoms. This requirement replaces the current duty on the Secretary of State for the DWP to take steps to ensure that people have access to guidance on the pension freedoms. It ensures that the single financial guidance body will continue to meet the guidance guarantee made by the Government when they introduced the pension freedoms legislation back in 2015.

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    In its recently published interim report on the review of the retirement income market, the Financial Conduct Authority identified some emerging issues. For example, the review found that draw-down of defined contribution pots is becoming much more popular, and accessing pension pots has become the “new norm”. The FCA is now working with the Treasury, the DWP and other stakeholders to fully understand all the emerging themes and to develop ways in which any issues can be addressed. Without reopening some of the earlier debates, that shows the FCA is able to respond to concerns about consumer interests.

    At Second Reading the noble Baroness raised questions about the adequacy of saving into a pension scheme at the levels required by automatic enrolment. The amendment she proposes would make it a statutory requirement for the body to provide guidance on other sources of retirement income, including housing wealth. While I agree with her that it is important that people plan for retirement, no matter what they age they are, and that they consider all their retirement income options, I hope to persuade her that her amendment is not necessary.

    As part of its pensions guidance and money guidance functions, the body will provide general information and guidance to members of the public about the benefits of saving towards retirement, and the range of products available to provide income in retirement, including the products that the noble Baroness mentioned in her speech. I think the noble Lord, Lord McKenzie, came up with the answer before me: these services are already provided by the Money Advice Service and the Pensions Advisory Service. For example, the MAS website has information on what equity release is and on other products, such as home reversion plans. In establishing the single financial guidance body, the information and guidance about sources of retirement income that are currently spread across all three existing bodies will continue to be delivered but will be much more joined up—for example, there will be just one website instead of three—making it easier for people to access and consider in the round. That will also make it easier for the new body to assess any gaps in the provision, quality or impartiality of the information and guidance available.

    Reverting to the debate that we had before the dinner break, the body will not provide advice on specific products. Its role is to provide general information and guidance on the options open to people so that they can make their own more informed financial decisions. It is not in the remit of the body to provide financial advice. In some instances, though—this was touched on during our debate—it may be that the body would need to refer an individual to an independent financial adviser, who would be able to advise them which products were the most suitable in their circumstances; I think that is what the noble Baroness, Lady Kramer, was implying. That in itself is a helpful service; we know that often, people are reluctant to seek financial advice or unsure of where to go. The body and its partners can play a role in breaking down those barriers, enabling people to understand when it will be beneficial or necessary for them to seek financial advice.

    Housing wealth, as the noble Baroness knows better than anyone, is a complex area. Equity release schemes, as an example, may be a suitable option for some, but it is important that people are made aware of the associated risks. The FCA’s ageing population study, to be published later this year, will consider how lending in retirement can be made to work better for older consumers—again, evidence that the FCA is conscious of its responsibility to consumers. That study will consider product innovation and building upon existing industry initiatives to facilitate mortgage lending to older consumers. The Government are clear that anyone considering equity release should seek independent financial advice to ensure that the product is appropriate to their individual circumstances.

    The noble Baroness, Lady Finlay, raised a number of issues. I may have to write to her about the transparency of exit charges. In a nutshell, though, so far as equity release is concerned, the FCA, as I think she said, has responsibility for the regulation of equity release products and advice on these. The Equity Release Council is the industry body for the sector and sets out rules and guidance that all members have to comply with. All customers must receive independent legal advice before taking out an equity release product. I hope that addresses some of the issues the noble Baroness raised about undue pressure being exercised by family members with an interest. The borrower has to provide a written suitability report, and the FCA requires the borrower to be provided with a “key facts” illustration for each product. Independent solicitors must also verify understanding before proceeding, and the customer must signal receipt and acceptance of the written suitability report. That report explains why they believe that equity release is suitable and why a particular product is being recommended to that customer. I think the noble Baroness raised the issue that people do not have to get regulated advice. I would like to reflect on that and perhaps drop her a line.

    So while the body may provide general information on these schemes, that is an example where it would be best placed to make people aware that they should be speaking to regulated advisers, and signpost them to the appropriate place. As I explained, the body is required to provide guidance to replace the pension guidance guarantee. That is because we want to ensure that the move to a single body in no way reduces the guidance on offer for those who wish to consider exercising their pension flexibilities.

    To conclude, the SFGB’s money guidance and pensions guidance functions already enable it to provide people with information and guidance on retirement planning, saving in a pension scheme, different sources of retirement income and, where appropriate, to signpost them to regulated advisers. These are all services which MAS and TPAS deliver now, and the body will continue to do that but in a more joined-up way for customers.

    Against that background, I ask the noble Baroness to withdraw her amendment.

  7. Baroness Hollins (CB)

    I add my support, but I wish to take this a little further. Older people are not the only members of the public who rely on easy access to cash in order to manage their daily budgets. People are now being required to use chip and pin instead of a cheque to obtain cash in a bank, which is not possible in a post office. The risk of chip and pin for many vulnerable people who have limited capacity is that it opens them to exploitation. They are more at risk of scams and other kinds of financial exploitation. It is just putting some more vulnerable people at risk. This is a wonderful opportunity to address the risk that many people now being encouraged and empowered to live more independently in the community could lose some of that independence.

  1. Viscount Trenchard (Con)

    My Lords, I well understand the objectives of the noble Lord, Lord McKenzie, and I have the greatest respect for what he is trying to achieve and for other noble Lords who have supported these amendments. However, we need to be careful not to make the legislation too complicated. I am not quite sure that I really understand the difference. The noble Lord is trying to include the need to provide information on financial capability. He is talking about financial inclusion and financial exclusion. The Bill already includes the need to have regard to financial capability. I am not quite sure that financial capability is the best way to describe what is meant. I think it is intended to mean financial literacy or financial awareness. Financial capability implies having financial assets. I therefore find it a little confusing. We have financial capability in the Bill anyway, which I do not think is perfect, and are now talking about adding financial inclusion and financial exclusion. The noble Lord’s definition of financial exclusion in Amendment 39 includes reluctance to seek appropriate advice. I do not fully understand why, if somebody is reluctant to seek the advice or guidance that sensible people tell him he should seek, that means he should be regarded as being financially excluded.

  2. Baroness Greengross

    My Lords, first, I thank noble Lords who supported me, at least in principle: the noble Baronesses, Lady Kramer and Lady Finlay, and, in particular, the noble Lord, Lord McKenzie. I do not mind how this happens and I am aware, having done a lot of work over the years on abuse of older people, that there are extreme dangers in people being given the wrong advice, particularly adult family and children. I just want to be sure that older people are being pointed in a direction that will be helpful to them. This is so complex and it is very important that we get it right; I thank the Minister for his obvious commitment to that. As long as it works, I do not mind. I just want to be sure that older people are getting the range of advice that they need. That includes their being sure that they are going along a track that is in their interests in the long term, so that this complicated system of new ways of using your pension is put into action wisely for those who cannot afford the sort of private advice that many of us here would not dream of acting without. I thank the Minister for his understanding of what I am getting at. I am happy to withdraw the amendment; I just hope that we achieve the goals that I think we all share. I beg leave to withdraw the amendment.

  3. Lord Kirkwood of Kirkhope (LD)

    My Lords, I am happy to follow the noble Viscount, Lord Trenchard. His point is understandable but it is more easily understood in the context of the ad hoc committee’s report on financial exclusion. We have had some response to that, already adverted to by the noble Baroness, Lady Coussins, and it is a great leap forward to have a Minister to whom we can now address some of these issues. But as the noble Lord, Lord McKenzie, was saying, what is missing is an overall strategy into which the differences he was trying to analyse can fit more comfortably. Absent a strategy, the Committee is perfectly entitled to try to make what it can of this important Bill—which is an important part, although not the whole, of the strategy—in order to expand the envelope as much as we can. These amendments do that. The speeches we have heard so far from colleagues support that, and I support these amendments.

    I have two specific things to say, though. I remind the Minister that according to Clause 18, Part 1 of the Bill is United Kingdom-wide. Amendment 22, tabled by the noble Lord, Lord McKenzie, explains the importance of consultation and names a whole series of institutions, including the devolved legislatures, that need to be taken into account. I might get boring about this as the Committee stage unfolds, but I want to be reassured that the Minister understands that this applies to Scotland, Wales and Northern Ireland as well. Differences are emerging in those places, which is not an accident, as devolution was set up to do that. I know Scotland better than Wales and Northern Ireland, but the Programme for Government that was only yesterday advertised by the Scottish Government is very ambitious. You can have a political argument about where they are going to find the finance, but the one signal difference I note is the tone being adopted in Holyrood—a social justice, progressive approach to providing social protection and social security. For instance, it has tweaked the universal credit architecture in a way that helps deal with some of the late payment and rent arrears issues building up in the rest of the United Kingdom. It has mitigated the effect of the bedroom tax and some of the other effects of the Welfare Reform Act 2012—and indeed the Welfare Reform and Work Act 2016—in a way that is not happening in the rest of the United Kingdom.

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    For that reason alone, somebody should be required to be responsible for actively reporting to the United Kingdom Parliaments collectively on financial inclusion and exclusion, and matters of that kidney, and this is the only body that fits the bill at the moment, and is available to us in Parliament. If that is not done, there are joint ministerial committees that meet—not often enough—to exchange best practice, to put it at its best, and to resolve differences, to put it at its worst. There is a very important theme running through Part 1 of the Bill that I have some concerns about, which are addressed by these amendments. I hope the Minister can give a positive response to the overarching ambitions in these amendments, at least.

    Returning to where I came in with the noble Viscount, Lord Trenchard, I accept that things will become clearer when we get a debate and a government response to the ad hoc Financial Exclusion Committee. That cannot come fast enough for some of us, who are wondering where it has been and when we can access it, but in the meantime the Minister should take note of some of the ideas in these amendments. They may be ambitious but they are certainly worthy of the department’s careful consideration as the Bill progresses.

Amendment 42A withdrawn.

Amendment 42B

  1. Lord Young of Cookham (Con)

    My Lords, the co-pilot is in charge of this leg of the legislative journey, and I apologise in advance for any turbulence. I thank the noble Lord, Lord McKenzie, for tabling these amendments and for the way he argued in support of them. As I listened to some of the contributions, it struck me that during this debate we have identified gaps in existing provision. One of the things we want the new body to do is to identify those gaps and then fill them. I will come back to this issue later on in dealing with some of the specific points that have been raised. I am grateful for the contributions that have been made and I will try so far as I can to address them.

    Clause 2 sets out the functions and objectives of the new body, including the role of the strategic function. In designing these functions, we have set the parameters so that the body has a clear remit to focus its efforts while at the same time ensuring that the scope is sufficiently wide so that it can respond to changing needs and circumstances in meeting that remit.

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    I begin with Amendments 19 and 39, which seek to integrate financial inclusion within the new body’s strategic function and to set out in statute a definition of financial inclusion and exclusion, the case made by the noble Lord, Lord McKenzie. As my noble friend mentioned at Second Reading, we take the issue of financial exclusion seriously. The Government are grateful for the work of the ad hoc Select Committee on Financial Exclusion in highlighting this important issue. I am all too aware of the appetite of noble Lords to read the Government’s response, and I recognise that the general election held this year and subsequent ministerial changes have, unfortunately, pushed back that response, which will be published shortly. None the less I am grateful for the comments from the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Coussins, about the appointment of my honourable friend Guy Opperman as a Minister with responsibilities in his department.

    I cannot anticipate the Government’s final response, but in the meantime I want to be as helpful as I can to the noble Lord, Lord McKenzie, and others by outlining our understanding of the term “financial inclusion”. I begin by picking up the point identified by my noble friend Lord Trenchard in looking at issues of definition. To quote the World Bank:

    “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit and insurance—delivered in a responsible and sustainable way”.

    That is an internationally accepted definition of financial inclusion. When we consider that definition, it follows that the Government’s policy regarding financial inclusion must be focused on ensuring that there is an adequate and appropriate supply of useful and affordable financial services and products. The Government therefore work closely with the industry regulator, the Financial Conduct Authority, to ensure that appropriate action is taken when the market fails to supply services and products. The noble Baroness, Lady Coussins, mentioned bank closures, which is an example of where the market has failed to supply what particular customers want. In passing, I note that in many parts of the country the Post Office is stepping up to the plate, and one should not underestimate its contribution.

    On the matter of “financial capability”, the term refers to the ability of the public to manage their money well, including the ability of members of the public to engage with services and products made available by the financial services sector. So there are two different concepts—capability and, as I shall refer to in a moment, the supply of services. Of course there is little value in ensuring an appropriate supply of useful and affordable financial services and products if people do not have the ability to actually use them. That is where financial capability comes in. It is the role of the single financial guidance body to improve the ability of the public to manage their money so that they have the skills, knowledge, motivation and confidence to fully use the financial products and services on offer.

    Against the background of those definitions, the concern that we have about these amendments is that the reference to “financial inclusion” would fundamentally change the nature of the new body from an information and guidance body to more of a regulator with specific powers to intervene in the financial services market. At the moment the Treasury and the FCA have responsibility and the relevant powers to intervene when the financial services market fails to supply affordable products and services. Against that background, the attempt in the amendments to give the body a remit over financial inclusion risks duplication and confusion.

    I think noble Lords will be aware of the FCA’s work in the area of financial inclusion. It is of the utmost importance that this progress is not impeded by unnecessary confusion over the role of different public bodies. Indeed, the FCA’s competition objective states that it may have regard to,

    “the ease with which consumers who may wish to use”,

    financial,

    “services, including consumers in areas affected by social or economic deprivation, can access them”.

    The FCA takes those objectives very seriously and has undertaken a number of pieces of work in recent years—

  2. Lord Sharkey

    Moved by

    42B: Clause 3, page 3, line 15, at end insert—

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    “( ) As part of its pensions guidance function, the single financial guidance body must make provision to ensure that members of the public receive the information and guidance set out in subsection (1) through either—

    (a) the single financial guidance body, or

    (b) regulated advice from a financial advisor,

    before accessing defined contribution or money purchase pension benefits.”

  3. Baroness Kramer

    Perhaps there is a slight misunderstanding here. The FCA certainly sees its role as regulating appropriately those financial services that exist, but where a gap exists, it takes no responsibility for filling it. Many in this House have had a long dispute with both the Treasury and the FCA about that, because the gap never gets closed. I draw that to the Minister’s attention, because often those who are not close to this matter assume that it has that role.

  4. Lord Sharkey

    My Lords, Amendment 42B is in my name and that of the noble Baroness, Lady Altmann, for whose support I am extremely grateful. I will speak also to Amendment 42C. Amendment 42B is very simple. It provides that, before accessing pension pots, people must have received the appropriate information and guidance either from the SFGB or from a regulated adviser. I touched on the need for this in my earlier remarks on Amendment 27A, and I am sure that I do not need to remind the Committee that take-up of advice on pensions is very low and that financial capability and understanding are also at very low levels. Conversely, financial misunderstanding is at very high levels. This augurs badly for sensible pension decisions.

    The FCA’s July interim report on retirement outcomes shows that accessing pension pots early has become the new norm under pension freedoms, as the noble Lord, Lord Young, noted a moment ago, with 72% of pensions accessed by people aged under 65. Most of these people withdrew lump sums. Half withdrew the full value of their pension. The FCA says that it found no evidence of people squandering their pension savings, but expressed concern about why people are shifting their savings out of pensions. Over half of the fully withdrawn pensions were not spent but were transferred into other savings or investments. This suggests, according to the FCA, a mistrust of pensions, and raises the possibility or even probability of new risks, such as paying too much tax and missing out on investment growth and higher retirement income. The FCA also found that most consumers chose the path of least resistance; they usually accepted the draw-down option offered by their existing pension provider without shopping around or even using the information provided by their own pension provider. That is perhaps entirely unsurprising, given the very low levels of take-up of advice and the high levels of ignorance and misunderstanding. It may be unsurprising, but it is also worrying.

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    The FCA’s Retirement Outcomes Review is the fifth such investigation into the UK’s retirement market. All five investigations have found much the same thing: they have consistently identified DC pension customers’ poor awareness of their options and the distrust, disinclination or inertia that can so easily lead to poor decisions. It is not just poor decisions that are a concern but scams and frauds as well. Without taking proper advice, vulnerability to scams and frauds increases. The FT reported earlier this year that losses from pension scams in March this year alone had risen to a record high of £8 million. Victims of what they described as “liberation fraud” were typically conned into placing their pension funds into investments that do not exist or are illiquid or incapable of delivering the promised returns. Victims are not usually warned about tax charges in liberating their pension funds before the age of 55, which can wipe out half the value of their savings. Being better informed and advised will not, of course, prevent all poor decisions or prevent all scams and frauds, but it is a powerful safeguard against these things. It is not the same as just having information advice out there somewhere; it means accessing and using this information and advice, which is what our Amendment 42B would do. It requires people, before they can access their pension pots, to have received information and guidance either through the SFGB or regulated advisers—the same kind of controls that currently apply to taking out a mortgage. The amendment would make that work for many more people.

    I turn briefly to deal with Amendment 42C, which would simply require the SFGB to report annually on the levels of usage of pensions guidance and regulated financial advice by those accessing their pension pots. As I explained earlier, the quality of guides is very high but the take-up is very low. We need to know how well the SFGB is doing in fixing this problem and have the SFGB publish the data. We need to see how successful it is, for example, in raising the level of take-up from the current extremely low 7%. That is a vital way in which to hold the new body to account and what the amendment does—although, having thought about it a little more, I accept that the SFGB may not be the best-placed organisation to do that. The Minister, from whom I gratefully take correction, is nodding as I say that. But I hope that the Minister will give careful and sympathetic consideration to Amendment 42B in particular. I beg to move.

  5. Lord Young of Cookham

    My initial response is that if the gap is indeed not closed, it is one of the objectives of the FCA to address that. I was just quoting that it has to have regard to,

    “the ease with which consumers who may wish to use”,

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    financial,

    “services, including consumers in areas affected by social or economic deprivation, can access them”.

    If it is not responding and ensuring access, that is a case not for giving that responsibility to another body but for holding the FCA to account to get it to discharge the responsibilities that we have given it.

    The FCA takes its objectives very seriously, and has undertaken several pieces of work in recent years to increase access and protect consumers, including a report on consumer vulnerability in February 2015. To give one example, in June this year, the FCA published a call for input on access to insurance, following a broader report on access to financial services that it published in May last year. The call for input seeks views on the challenges that firms face in providing travel insurance for consumers who have or have had cancer and the reason for pricing differentiations in quoted premiums.

    I look forward to seeing that work develop, and I encourage all relevant stakeholders to provide responses to the call for input. It is important work and, in response to the noble Baroness, is an example of the sort of project to promote financial inclusion that the FCA can conduct in its role as industry regulator.

    Against that background, I urge the noble Lord, Lord McKenzie, to withdraw Amendment 19 and not to press Amendment 39. I am grateful for the opportunity to address the important topic of financial inclusion, to which I am sure we shall return, but, as I said a moment ago, the Government are concerned that the amendment could create confusion between the roles of the FCA, on the one hand, and of the SFGB, on the other.

    I turn to Amendment 25, which makes provision for the new body to advise the Secretary of State on the role of Ofsted and the primary school curriculum. I am aware that the Lords’ Select Committee on Financial Exclusion made a similar recommendation on the role of Ofsted and the primary school curriculum in its recent report. We will of course respond to each recommendation in due course and give them the close attention that they deserve but, for the time being, I just comment that the Government believe that this amendment could cause confusion about the remit of the new body with regard to the school curriculum.

    As was stated earlier, the new body will have a role to help co-ordinate and support initiatives delivered by charities and other parties which are designed to improve the financial education of children and young people. It will be able to identify gaps in provision, identify best practice, and work with schools to understand how they are delivering financial education, in which lessons that is taking place, and explore further the barriers to school involvement. The Government are clear, however, that the school curriculum and monitoring of school performance is a matter for the Department for Education in England and those of the devolved nations.

    In practice, this means that the body will be able to undertake activities to help schools to provide financial education. For example, the body will be able to undertake activities such as funding the project undertaken by the Money Advice Service and the Education Endowment Foundation to run a trial of Young Enterprise’s Maths in Context programme. Some 12,000 pupils in 130 English schools will take part in the trial, testing whether teaching maths in real-world contexts improves young people’s financial capability and attainment in GCSE maths exams.

    On Amendment 22 in more detail, it would require the body to report on progress in addressing financial exclusion. I note that an annual report on progress in tackling financial exclusion was a recommendation of the Lords’ ad hoc Select Committee on Financial Exclusion; we will respond to the report shortly. I understand the point that noble Lords are making with the amendment, but I reiterate my concerns regarding the use of the term “financial inclusion”. As I have said, the body is designed to build financial capability by providing information, guidance and advice so that members of the public are equipped with the tools they need to handle financial matters. To take on board what my noble friend Lord Trenchard said, it is for this reason that capability is enshrined in the body’s strategic function rather than financial inclusion, which is better tackled by central government working collaboratively with the Financial Conduct Authority as the industry regulator. The present amendment creates a possibility that the new body will duplicate work undertaken within central government and by other public bodies but perhaps less effectively, as it will not have the any powers to regulate or enforce activities.

    Amendment 22 also sets out the actions that the new body must take as part of a national strategy to improve financial inclusion. For instance, it places a requirement on the body to work with banks and other financial institutions to ensure that hard-to-reach groups are able to access financial advice and guidance. I reassure the House that Clause 2(7) makes it clear that the body must work with others in the financial services industry, including banks, as well as the devolved authorities and the public and voluntary sectors to support and co-ordinate the development of a national strategy to improve the financial capability of the public. We have seen organisations, both private and public, which have failed in their delivery because they were stretched too thinly or trying to operate without the necessary powers or influence. The body has an important task in improving financial capability by providing information in the United Kingdom—in response to the noble Lord, Lord Kirkwood—as well as guidance and advice, so that members of the public are equipped with the tools that they need to handle financial matters. It should not be distracted from that significant and important challenge. I am aware that one amendment is focused on prioritising front-line services to improve delivery. Some of the amendments before us risk diverting the attention of the body, and its resources, from its prime task.

    I turn to the important issue of mental health conditions, which a number of noble Lords mentioned. The Prime Minister has expressed her commitment to helping those with mental health conditions, and in January set out a range of measures to improve mental health services. In addition, the FCA has increased its focus on people with mental health conditions and held a TechSprint event on this theme in March. Over 100 developers, mental health and technology experts and around 32 organisations took part, and there was a strong focus from all teams on designing concepts that encouraged people to continue to manage their own finances but put in place safeguards to help them when they felt they needed it most. We welcome that work and are pleased that the FCA is facilitating increased industry engagement so that appropriate products and services are available to people with mental ill-health. I reassure noble Lords that the body’s money guidance and strategic functions enable it to provide help to those with mental health conditions, so that they engage with the financial sector and its services.

    I take to heart the point made about aggressive online behaviour, calls at anti-social hours to people who are vulnerable, and potential financial coercion. I take on board the need to monitor this and have an appropriate response. The Government’s view is that the body’s functions are sufficiently broad to allow it to take appropriate action in this space, as noble Lords have identified, and we look forward to seeing it work with the industry and the voluntary sector on this important matter.

    Finally, Amendment 22 requires the new body to conduct an annual review of the impact of the Welfare Reform Act 2012 on financial exclusion. The noble Lord, Lord McKenzie, made some critical comments about our progress on welfare reform. Universal credit is designed to mirror the world of work and the evidence so far is clear that, under UC, people are moving into work and staying at work for longer than under the old system. I understand the object of the amendment, which is to make sure that the Government’s policies are monitored, but I have to say that I do not think it should be the work of this body to assess the impact of legislation. If I may say so to the noble Lord, Lord Kirkwood, nobody did this better than he did when he was chairing the Select Committee on Work and Pensions in another place.

    In relation to the Welfare Reform Act 2012, the Government already have evaluation mechanisms in place. For example, the universal credit evaluation is a comprehensive programme of analysis designed to tease out the economic, social and behavioural impacts of the programme. Research and analysis are conducted to provide continuous tracking and inform the evaluation and the expansion of UC, focusing specifically on the effects that it has on both claimants and staff experience, behaviours and outcomes. That programme is externally assured by a panel of experts drawn from a number of UK and US academic research institutions. In addition, evaluation outputs are routinely published and provide an important and analytically robust evidence base for external observers. The department will continue to conduct extensive research, evaluation and analysis of individual reforms, which will be published in line with professional protocols.

    I will try to respond to some of the issues raised during the debate with some in-flight refuelling. The Government recognise the importance of enabling access to financial services among older people. Issues regarding access and vulnerability are at the core of the FCA’s mission and business plan, with the FCA due to undertake a number of projects, including its ageing population strategy, which will be published in the autumn—we may come on to the strategy in a later amendment.

    On gaps in the market, the Government have the ability to ensure the availability of products. We have seen the example of what the Government did on flood insurance when there was a clear gap in the market for those living in flood plains who would not get insurance. The Government intervened in the market in order to make sure that an appropriate product was available. I am assured that the responsibilities of the devolved authorities are very clear. In many cases, the Bill makes it clear that the SFGB has to work with the devolved authorities and public and voluntary sectors where responsibility rests with them. For example, debt advice is already done by the devolved authorities.

    I apologise for a somewhat lengthy response but noble Lords have raised some really important issues. I hope that the explanation I have provided will explain why we are concerned about the relationship between financial inclusion and financial capability. These proposals would greatly expand the function of the SFGB and risk causing duplication and confusion over the role of other public institutions. On that basis, I ask the noble Lord to withdraw his amendment.

  6. Baroness Altmann

    My Lords, I support the amendment, to which I have added my name. It would make the take-up of guidance the default option or a mandatory option for anyone who does not have independent, regulated financial advice. We are taking time and spending so much effort setting up a body that is designed to help to guide and inform the public; this amendment would help to ensure that the public actually get the benefit of it.

    Clause 5(1) gives the Secretary of State powers to issue,

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    “directions to the single financial guidance body”,

    to do this. Therefore, before anyone could transfer or access their pension savings, they would have received this guidance, which will be set up specifically to make sure they understand the risks before they make any decisions about their pension. Someone would also explain the tax consequences and the potential long-term dangers of giving up a pension because, once they have given it up, they cannot get it back. As the noble Lord, Lord Sharkey, just remarked, the recent FCA research shows that there are some people who are transferring money out of their pension and just putting it into a cash account or a different investment because, clearly, they do not understand the benefits of keeping it in a pension. Having somebody explaining it to them first would be very much the aim of this particular body.

    I wholly support the pension freedoms that the Government have introduced, but they are introducing them into a landscape where, for the past few decades, people were encouraged to believe that they did not really need to understand or engage with pensions, because all the decisions were taken for them. For most people, they were in a default fund on their savings journey and then, when they took the money later on, they were put into an annuity and that was it. They did not really need to understand what any options were because they did not really have many options. Unfortunately, people did not understand how annuities worked either. If we make this guidance a default or mandatory option then we make sure that we are protecting the public as well as giving them the freedoms. It is right that we give them the opportunity to make decisions that will suit them, but we have to make sure that we give them the opportunity of making properly informed decisions and as fair a chance as possible of making the freedoms work for them.

    Providers too often want people to make a decision when they are too young, for example. It is not just in the freedoms landscape that people are taking their pensions early; the majority of people were buying annuities well before the age of 65 under the previous system, too. I hope that the Government will seriously consider that the 7% take-up rate for Pension Wise is woefully low—we need to find a way to increase that and we need to make sure that we protect the public and give them the fairest chance of making the freedoms work. Pension Wise or the new body could, for example, issue vouchers for everybody who is coming to the stage at which they might need to make a decision about their pension. They could be sent a voucher for a free guidance session. The financial guidance body, perhaps with the FCA and with providers, can work on ways of boosting take-up, but it is definitely something that would make the work that we are doing in this Committee so much more valuable around the country. I support this amendment.

  7. Lord McKenzie of Luton

    My Lords, we support this amendment. We think that it is a good, strong, robust amendment. It takes us back to the introduction of pension freedoms which, I am afraid, were done rather precipitately and without the groundwork being properly laid. This was a point that my noble friend made at the time but it fell on stony ground.

    I was going to ask what the take-up of regulated advice or guidance was at the moment but the noble Baroness has given us the 7% figure for Pension Wise. If one is heading for a much higher percentage, it raises the question of what the resource implications of that would be. I do not know if any groundwork has been done—it is not a reason for not doing it. These are important situations. My noble friend has prompted me about the idea of an MoT at the age of 50 as part of the process to get people to focus on their upcoming pensions. We are certainly happy to support this. I am interested to hear what the Minister has to say on what the problems with it might be. Whatever they are, I would hope that we could overcome them, because this could make a very significant difference to the pensions landscape.

  1. Lord McKenzie of Luton

    My Lords, I thank all noble Lords who have spoken on these amendments. With the exception of the noble Viscount, Lord Trenchard, who had some equivocation about them, and the Minister himself, all were in support and I am grateful for that. The Minister has given a very long, very full reply and I will certainly need to take Hansard away and have a read of that, but I would like to pick up one or two points. He referred to the evaluation already in place for universal credit and the welfare reform. What evaluation specifically has focused on the impact of these welfare changes—or social security changes—on the build-up of debt and on the relationship with preponderance of debt? I ask this particularly because there are a number of instances identified in the report where there is clearly a correlation between the social security provisions and debt. The issues around the seven-day waiting period is a simple example. There are issues around the payment of rent—a monthly payment for some. There are also issues around council tax support. That support has changed and is delegated to local authorities at a time when their budgets are being slashed. We will discuss the nature of debt shortly. One of the issues flowing from that is the changing nature of debt. For example, utility bills and council tax bills are featuring more prominently in debt. I believe that at least part of that is a direct consequence of the system that the Government have put in place.

    The Minister was concerned about the definition of financial inclusion or capability and said that the amendments could introduce confusion into the standard international definition. Leaving aside the precise semantics, what does he see as the Government’s role in all this? What are they going to do to improve financial capability—if that is the terminology he prefers—or financial inclusion to help people make better use of financial services and banking so that they can play a wider role in everyday life? That is what this is about at the end of the day. What will the Government do? What is on the Minister’s agenda? How will that be shared across Governments given that the report talks about needing to join up these services? I believe that a financial inclusion task force used to do some of this work but the coalition Government abolished it a few years back. This issue features as one of the strong recommendations in the report. Leaving aside terminology, these issues are not joined up at the moment and they need to be.

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    The noble Baroness, Lady Kramer, rightly pressed the Minister on the extent of the FCA’s role when there is a gap—namely, precisely what it should be doing in these circumstances. I need to read the record but there seemed to be a dispute over the extent to which the Minister’s assertions were correct in that regard.

    A number of other points were made, including that of post offices filling the gap when banks close. However, I think there is some way to go before that happens. It is right to say that post offices are becoming more alert to these situations but I do not think that they are anything like clear substitutes for banks.

    I thank the noble Baroness, Lady Coussins, for agreeing about the importance of financial inclusion—or whatever term we use—being an integral part of the strategy we adopt. That must be right. The noble Earl, Lord Listowel, mentioned the importance of this area to young people. The noble Baroness, Lady Finlay, rightly expanded the range of circumstances about which we should be concerned. I think the Minister said that nothing in the Bill prevents action being taken in relation to fluctuating mental health and disability issues and issues around coercion. Incidentally, the noble Viscount, Lord Trenchard, talked about people’s reluctance to seek advice. I would have thought a clear case of that would be where it is available but they might feel intimidated—actually intimidated or intimidated by the environment.

    The noble Baroness, Lady Finlay, touched on the important issue of gambling. There is quite a chilling paragraph or two in that report about online providers deliberately targeting vulnerable people at two or three o’clock in the morning, when they are most susceptible to spending and making their commitments.

    The noble Baroness, Lady Hollins, supported the amendment and referred to the challenges of chip and pin. A statistic in the report says that two-thirds of people aged 18 or over have never used a cash machine or would not want to. That is quite a frightening level of disconnect.

    We have been at this for quite a long time but it is an important subject. I propose to take the Minister’s response away, and we may return to it on some basis at a later stage. In the meantime, however, I beg leave to withdraw the amendment.

  1. Lord Young of Cookham

    I thank all those who have taken part in this debate for these amendments on the specifics of the pensions guidance function.

    Amendment 42B, tabled by the noble Lord, Lord Sharkey, and my noble friend Lady Altmann, seeks to ensure that people have taken guidance or regulated advice before accessing their defined contribution pension pot. The pension flexibilities introduced in 2015, which a number of noble Lords who have taken part in the debate have spoken about, gave people the freedom and choice to decide how to access their defined contribution pension savings. The flexibilities give people control of their money and allow them to make choices which tailor their approach to their own particular circumstances. As has been mentioned in the debate, at the point of introduction, this provision was not there.

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    Since 2015, we have provided Pension Wise as a source of free and impartial guidance to help people make more informed decisions. There have been over 5.3 million visits to the Pension Wise website since launch and there have been more than 154,000 appointments. Customer satisfaction with Pension Wise remains very high. In 2015-16, Pension Wise delivered 61,000 guidance appointments. In 2016-17, this had increased to 66,000. By the end of July this year, there had already been nearly 27,000 appointments. This clearly demonstrates that the work we and the industry are doing to promote Pension Wise guidance is working.

    It is important that people know that help is available when making important decisions about their pensions. Clause 3 ensures that the Government’s guidance guarantee will continue to be met by the new body. It is also important, however, that people have the freedom to choose sources of information, guidance or regulated advice that are right for them before making a decision about their pensions. It is not immediately clear that such an intervention at this point in the journey would be effective in changing people’s behaviour, and it might serve only to frustrate people who have already made the decision about accessing their money. As has been mentioned, such an approach would not be without cost, which would fall on the firms that pay the levy. Additional costs would need to be justified with clear benefits in terms of better outcomes for people.

    Pension schemes and providers are required by law to signpost people to Pension Wise guidance. We know that this is working: pension providers are consistently cited by around half of the people who contact Pension Wise as the place they first heard of the advice. We are working with providers to ensure we continuously improve the effectiveness of signposting. We are also working with a number of employers, locally and nationally, to promote the Pension Wise service.

    The FCA’s Retirement Outcomes Review: Interim Report found that take-up of Pension Wise was low. However, it also highlighted a number of mitigating contextual factors which should be considered. It found that 53% of pots had been fully withdrawn, but that the vast majority of these were small pots—60% were smaller than £10,000 and 90% were smaller than £30,000. It also found that 94% of people making full withdrawals had other sources of retirement income on top of the state pension, and so the FCA did not see this as evidence of people squandering their pension savings. Lastly, some people who did not use Pension Wise decided that financial advice was the right route for them. Between October 2015 and September 2016, sales to people who took regulated financial advice accounted for 37% of annuity sales and 70% of draw-down sales.

    Having said all that, I find this all quite difficult. As noble Lords have suggested during this debate, it may well be the case that people could benefit from using more guidance. However, the landscape is somewhat complex and bears further scrutiny. I am not persuaded that the amendment in front of us is the right way to go. I listened with interest to a number of the alternative suggestions that were made.

    I return to my script. The interim report to which I referred a moment ago has raised a number of issues, and the FCA has proposed a number of remedies. It has invited views and is actively engaging with government, regulators, industry and consumer bodies before delivering its final report in the first half of 2018. The right way forward may be to wait for the full report of the FCA and consider its recommendations, which may pick up some of the points made in this debate, in light of all of the information and evidence. This will ensure that we make the right interventions at the right time, which help people make the right choices for their circumstances.

    Amendment 42C—which I was never attracted to—tabled by the noble Lord, Lord Sharkey, would require the new body to report annually on the usage of pension guidance and regulated financial advice by members of the public accessing their pension pots. The noble Lord made it clear that, on reflection, he thought that this might not be the best way to proceed, so it might be for the interest of the House if I skip the next four paragraphs of my remarks, as I think that the noble Lord indicated that this may not be the best way to go forward. There is already a robust process in place in this area, and we should not seek to duplicate work which is already in train and well advanced. The FCA has already identified a range of indicators that are intended to give a snapshot of the market for financial advice and establish a baseline.

    I think that I have dealt with the points that have been raised in the debate; if I have not, I would like to write on them. However, against the background of what I have just said, I hope that the noble Lord may feel able to withdraw his amendment.

Amendment 19 withdrawn.

Amendments 20 to 23 not moved.

Amendment 42B withdrawn.

Amendment 42C not moved.

  1. Lord Sharkey

    My Lords, I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord McKenzie, for their contributions to the debate. In a way, I am not quite certain where this leaves us. I listened quite carefully to what the Minister said, and I can understand the merit in having this completely underworked, over-resourced FCA carry out yet another inquiry in its spare time into this again. However, I can also understand the merits of doing something fairly concrete, fairly soon, about what I think we all agree is a problem. I am also puzzled about why it is quite so difficult, in the sense that this is what happens when you take out a mortgage. It seems to me perfectly reasonable to suggest this is also what should happen when you access your pension.

    In passing, I should say that, first, I am quite grateful for the Minister’s speedy dispatch of the second amendment—I will not dwell on that—but I disagree with him when he talks about Pension Wise working. That is not right or accurate; it is misleading. A more accurate view is that it works exceptionally well for the very small number of people who use it. That is a better statement than the blanket statement that Pension Wise is working. That is one of the roots of the problems that we face here.

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    In the face of the lack of absolute enthusiasm for the first amendment, I will withdraw it. However, we should continue the conversation about this and not just wait for the FCA to opine. There is perhaps room for a more round-table general discussion about what advances we can make without waiting for whenever—shortly or in due course—the FCA will publish its findings. However, in the meantime, I beg leave to withdraw.

Amendment 24

Amendment 42D

  1. Baroness Drake

    Moved by

    24: Clause 2, page 2, line 34, at end insert—

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    “( ) The single financial guidance body must produce a report advising the Secretary of State on how government departments might best assess the impact on financial inclusion, financial capability and household debt of any proposals for a change to public expenditure, administration or policy.

    ( ) The report must be published within the period of 12 months beginning with the day on which this Act is passed.”

  2. Baroness Drake (Lab)

    My Lords, we all know that the UK faces a series of systemic challenges, which drives the need for the new financial guidance body as part of the armoury of response. Within the population there are persistently low levels of financial capability, rising indebtedness, falling financial resilience, and poor understanding of pensions and other complex financial products. The financial capability challenge is not restricted to the squeezed and financially struggling; it goes up the income value chain. The Money Advice Service figures, on a range of measures, reveal that the picture has got worse since 2005. The growth of these problems has many roots, but they are compounded by inefficiencies in the financial services market, such as the poverty premium paid by the poor to access credit; the asymmetry of knowledge and understanding of products and services, which disadvantages consumers across the income range; and geographic and digital access barriers.

    I shall scope the scale of the national challenge. ONS statistics reveal that the proportion of disposable income that goes into savings has fallen to a record low. Wages have been weak for much of the period since 2008, and the Bank of England’s chief economist has observed that the structural factors contributing to weakening wages are unlikely to reverse any time soon. Household debt is rising. Recent Bank of England figures reveal £200 billion owed in consumer credit, excluding mortgages, and the biggest surge in the number of customers missing loan repayments and default rates on credit card overdrafts since 2008. Figures for unsecured loans and car finance are even worse, and some 3 million people are struggling with severe debt.

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    The Lords Select Committee report on financial exclusion sets out clearly the multiple causes of exclusion and its effect on different groups of society, compounded by the barriers that the low-incomed, elderly and disabled face in accessing financial services. Auto-enrolment has seen the rise of defined contribution workplace pension savings as a mass market, involving some 16 million workers, their savings expected to reach £1.7 trillion by 2030. The largest increase in workplace pension participation rates has been for those earning between £10,000 and £20,000. That is all good news on pension savings but over time, as more workers save into defined contribution schemes, the financial capability challenge gets greater. In future, individuals will bear more risk than previous generations of pensioners, yet many are ill equipped to manage those risks and make complex decisions. Many accessing defined contribution pension pots today have other main sources of retirement income, such as a defined benefit pension. That will not be true for future generations.

    The financial resilience of the public has weakened. A growing sense of unfairness and heightened insecurity across both low and moderately incomed households is eliciting behavioural responses. The Bill gives the financial guidance body a strategic function to co-ordinate the development of a national strategy on financial capability and managing debt. However, that remit cannot displace the need for government leadership and overall co-ordination. The lessons of the past confirm that substantial funding of national financial capability programmes does not deliver the step change needed in the absence of government ownership and drive.

    The new body will be an executive non-departmental public body—a delivery arm of government. One has to be realistic about how far its authority and resources can reach. It will have a demanding focus on delivering front-line support for millions of people. The new body can map, measure and identify problems, and it can provide insight, give guidance and support a national strategy, but it cannot manage the process of government—it will have neither the means nor the resources.

    Public policy in many areas can be looked at through the lens of financial inclusion and capability, such as taxation, welfare, education, the regulation of markets, health and transport. The whole tanker of government has to be moved to mainstream consideration of the problem and to get departments to assess how their policies, administration and expenditure impact the financial capability of the UK population. Indeed, the Prime Minister herself observed in January that the Government needed to,

    “recalibrate how we approach policy development to ensure that everything we do … helps to give those who are just getting by a fair chance—while still helping those who are most disadvantaged ... they need a government that will make the system work for them”.

    An important way in which the new body can discharge its function to support a national strategy is to give it a remit to produce a report advising the Secretary of State on how government departments might best assess the impact on financial inclusion, capability and household debt of any proposal for a change to public expenditure, administration or policy. The concept is not novel—impact assessments are already required from departments on a range of matters, such as regulatory burden or equalities. There are impact assessment toolkits in use; the NAO audits their quality and effectiveness.

    This amendment gives a new ingredient by placing a requirement on the guidance body to deploy its expertise and report to the Government on how departments might best assess the impact of their actions on financial capability and household debt. Giving the new body a duty to produce such a report, to which the Government will need to respond, will contribute to achieving greater government ownership and engagement in delivering a national strategy.

    I return to the theme of my opening comments. The UK faces a series of systemic challenges which require a shift in the nature of government engagement—something on which I think the Prime Minister and I agree. Without the formal discipline of government mainstreaming and assessing the impact of public policy, a national strategy on financial capability and household debt will not deliver the desired outcomes. Just giving a large budget to an NDPB is not going to do it. The Government have to buy in to mainstreaming and delivering a strategy to meet these challenges. I beg to move.

  3. Baroness Altmann

    Moved by

    42D: Clause 3, page 3, line 25, at end insert—

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    “( ) As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication, such as transferring an occupational or personal pension to an unregulated scheme.”

  4. The Earl of Listowel

    I support Amendment 24, to which I have added my name, and I hope that the Minister will find it helpful. I am particularly concerned about parents and children involved in indebtedness and the pressure on families that arises from that—something that we discussed during the first day in Committee. At a time of crisis, when Governments have to make very difficult decisions, they often seem to make short-term decisions that can have a long-term, adverse impact on society, particularly on families. There are many routes to productivity or failure to be productive, but family dysfunction is a core basis of the failure to produce productive citizens.

    More and more evidence is becoming clear that if children—even those up to the age of 25—experience adverse circumstances or difficult relationships within the family, particularly during the pregnancy or immediately after birth, their ability to do well at school, make and keep relationships, and have good physical and mental health well into adult life is impaired. This is a helpful amendment to give us a bit more breathing space and think more about the decisions that we as parliamentarians come to in the heat of very difficult economic circumstances, and about what impact they have on the long-term success and productivity of our society.

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    I visited Germany earlier this year and was impressed to learn that none of the shops is open on Sundays. It is not permitted for businesses to send emails after 8 pm at night. It is a cultural norm not to work beyond 6 pm in the evening. It is seen as inefficient to do so. Germans seem to have a far better work/life balance than us and are renowned to be more productive than we are. I am sure that there are many more factors to take into consideration, but under pressure and in the heat of the moment, with the short-term decisions that seem so important, perhaps we lose sight of the fundamentals.

    I give credit to the Government for recognising the fundamental importance of family life and the significant investment that they have made in supporting couple relationships. The high levels of employment that the Government have achieved have reinforced couple relationships. Professor Melhuish makes clear that high levels of employment tend to conduce to less family breakdown. These are complicated matters, but a report of this kind could give us space to step back and think about the implications of the decisions that we are feeling pressed to make at the moment, particularly what impact they may have on families and the ability of our children to thrive in the future. I hope that the Minister can give a sympathetic response to this amendment.

  5. Baroness Altmann

    My Lords, I will also speak to Amendment 42E. Effectively, these amendments would ensure that anyone who received an unsolicited approach about their pension would have to go to Pension Wise before they were permitted to do anything or receive the guidance if they did not have an independent financial adviser.

    I admit that this amendment is the result of the fact that we were unable to find a way to ban the cold calling that leads to the scams that we are trying to deal with here in the Bill. I also thank the Minister for the recent statement from the department that it has decided that it will ban cold calling for pensions. However, I hope your Lordships will agree that this seems like an ideal legislative vehicle in which to carry out the Government’s wish to ban cold calling and to protect the public effectively. Banning cold calling effectively protects members of the public from scams. Scams that result in people losing much or all of their pension are almost always the result of an unsolicited approach. So this is a roundabout way of trying to achieve something which is clearly in the public interest and which the Government themselves would like to do.

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    We could require people who had an unsolicited approach either to have a financial adviser to ensure that what they were doing was right or to have a conversation with our guidance service to assess what they were about to do. Presumably, the first question from whoever was speaking to them from the guidance service would be, “Is this the result of an unsolicited approach—a cold call or an email from someone you did not know, or a text or whatever?”. At that point, it would be possible to protect the person before they could sign away their pension in a scam. There is a classic trick of rushing people into parting with their money or signing on the dotted line by saying that it is a limited offer which is available only today or is about to run out. That would not be able to happen if somebody had had to make an appointment with Pension Wise or the guidance body and had discussed it first.

    I hope that we can discuss this issue. If this is not the best way of achieving the aim, I hope that the Government will consider introducing into this Bill another method of achieving it so that we can start the ball rolling on protecting the public and getting rid of cold calls. We have done that for mortgages. I know that the Minister has said that it is a complex matter, but I would be very grateful if she could explain the complexity which means that we should pass up this opportunity to do something that the Government themselves want to do when no other legislative vehicle in which to do so is in sight for the next couple of years. I beg to move.

  6. Lord Stevenson of Balmacara (Lab)

    My Lords, I support the amendment introduced forcefully by my noble friend Lady Drake. I am not sure who is responding from the other side—whether it will be a transatlantic journey or just a short hop—but I am sure that it will be entertaining nonetheless. I have three points to make and I hope that the Minister will be able to fit them into the very brief swoop around the skies that he is about to make.

    The amendment tries to flesh out a little more of our earlier discussion. In so doing, it makes this point: there needs to be a body that has responsibility for assessing many of the activities that either advertently or inadvertently are made by government at all levels, whether regional or national, and by other bodies involved in the space that we are talking about—people’s lives and their capabilities to cope with the financing of them. The method chosen by my noble friend in her proposal, supported by the noble Earl, Lord Listowel, is to think about how other policies initiated by government as a whole need to be measured and impacted.

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    My noble friend mentioned the impact assessment. I have the impact statement for this very Bill. Those who have read it—and I have—can see that, as well as the broader discussions about the intricacies of the costs of this provision, there are statements around the impact of the measures that we are discussing on competition, innovation, the wider economy, equality, the environment, and social and sustainable development. This is not new ground, in terms of what the Government have to do to assess that the proposals they are bringing forward for legislation are properly considered.

    I have reflected a little on what was said in our earlier debate this evening. The noble Lord made a point in relation to trying to sort out the impact that it could have been alleged was being made on the SFGB, as opposed to the FCA or indeed the Government. It would be sorted if more work were done by those preparing policies across the range of government activities in the manner specified in this amendment. Therefore, I commend it to him.

  7. The Earl of Kinnoull (CB)

    My Lords, I had not intended to say very much but, after discussing this issue with the noble Baroness, Lady Altmann, earlier, I thought that I should say a few words now. As I said at Second Reading, my interest is very much in Part 2 of the Bill—an area that is home territory for me and on which I have something to say. My drafting eye was caught by Amendment 42E. I feel that having a decent definition of “unsolicited communication” would be very valuable in legislative terms as we go through this process. It applies not just in this area, which has been very eloquently explained by the noble Baroness; it applies also in Part 2 and elsewhere. Therefore, I feel that it is worth debating it now.

    As I see the definition, even simple things such as a letter or some sort of Facebook communication would not fall within it, so I simply say that it is worth having a good definition so that we know what a cold call is. It is not just a telephone call. I receive an awful lot of Part 2-type telephone calls at home, admittedly in Scotland, every single lunchtime, but there are other methods of cold calling. Certainly I have been shown very worrying letters by local vulnerable people in Scotland suggesting that they do something urgently about their pensions and so on.

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    Therefore, I think that we need that definition, and I strongly support the thinking behind these two amendments. I would be very happy to join a meeting to talk about how one might tweak definitions and whether a definition is needed here or elsewhere in the Bill, but I think that it would be very helpful to have a clear idea of what a cold call is.

  1. Lord Young of Cookham

    My Lords, I will try to reflect the German work/life balance referred to by the noble Earl, Lord Listowel, by sitting down well before six o’clock. I am grateful to the noble Baroness for introducing her amendment, and as I do so often, I found myself in agreement with nearly all of her analysis of some of the challenges out there: the fall in the savings ratio and the need for a holistic approach to these challenges. I also agree with what the noble Earl said about the problems faced by young families. Where I parted company with the noble Baroness was when she sought to place this extensive new duty on the single financial guidance body. Basically, what her amendment does is to require the new body to produce a report within its first year advising the Secretary of State on how government departments might best assess the impacts of any changes in public expenditure, administration or policy on financial inclusion, financial capability and household debt.

    I have a lot of sympathy with the intent behind the amendment. I agree with much of what the noble Lord, Lord Stevenson, has just said about the need to stand back and take a holistic approach to the issue, and of course the Government do not want to do anything that would have an adverse impact on financial inclusion, financial capability or household debt through any of the policies that they pursue. However, I have real difficulty with the point that the noble Baroness is trying to make here, and I do not think that the amendment is either necessary or appropriate.

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    As I implied a moment ago, the scope of the report proposed in the amendment is very far reaching indeed. The definition of,

    “public expenditure, administration or policy”,

    is very broad. I have to ask the noble Baroness whether she will compel the body to produce a report for the Secretary of State which considers how to assess the impact if, for example, the Chancellor chooses to adjust expenditure on infrastructure, defence or healthcare. I am really worried that the amendment could overstretch this body’s resources in its first year and expand its remit far beyond that which was originally envisaged. In its first year the body is going to have to prioritise resources into bringing together three disparate bodies, identifying gaps in the market, as we heard earlier, and building on its primary task. If we start going down this road, I see a real risk of diverting resources away from the front line of providing services, bringing together and co-ordinating the functions of the three pre-existing bodies, and from front-line delivery.

    The second point is one that has already been touched on. Ministers already review a range of issues when they assess new policies. The financial impacts on individuals and families are considered as a normal part of policy-making, and as noble Lords know, impact assessments are also produced to accompany legislation. I am not convinced that this broad requirement is in keeping with the body’s strategic function of working with others to support the co-ordination and development of strategies to improve people’s financial capability, their ability to manage debt, and the provision of financial education for children and young people. This function is about identifying the most important issues and possible interventions in financial capability, personal debt management and financial education for children and young people working through others.

    In response to the point made by the noble Lord, Lord McKenzie, in winding up the last debate and in part response to the issues raised in this debate, a lot will become clearer as to where the Government are coming from on this when we publish our response to the ad hoc Select Committee. The noble Lord, Lord McKenzie, asked me where the Government are coming from, and given the number of recommendations made by the ad hoc Select Committee, I think that that is the right place to reply.

    On government leadership, we take the issues of capability and inclusion very seriously, and perhaps I may reiterate my comments about government leadership. In addition, the Secretary of State can request guidance or advice from the new body under Clause 2(2), which will help co-ordination between the Government and the body. I am grateful to the noble Baroness for giving me the opportunity to put the Government’s view on this important issue on the record and to underline our concerns about the potential diversion of resources if we go down this particular route.

  2. Baroness Finlay of Llandaff

    My Lords, has the definition of cold calling been sought from the trading standards group of scambassadors who have been looking at all types of scams? It would be incredibly helpful to have that definition. I also wonder whether this amendment is too narrow as written. However, I congratulate the noble Baroness on using this opportunity to do something that desperately needs to be done. The amount of scamming is a scandal.

  3. Lord McKenzie of Luton

    May I receive a bit of clarification on the Government’s response to the House of Lords Select Committee? I think the Minister said that it would be soon, but can he give us an assurance that we will receive it before we get to Report? We are going to have a little gap after next week. I hope that that will be enough time for the Government to respond.

  4. Baroness Altmann

    My Lords, I refer to my Amendment 73, which attempts to define cold calling using many more words. That was in the context of banning cold calls for claims management companies. I do not claim that this is the correct version for cold calling.

  5. Lord Young of Cookham

    I would love to give a direct and helpful response to the noble Lord’s very reasonable question. It would be irresponsible of me so to do. There are a lot of government departments involved in this. I cannot give an exact timetable at the Dispatch Box today, but I will make some inquiries and see whether we can shed some light on a publication date perhaps later in our proceedings.

    I think I was at the end my peroration, imploring the noble Baroness, Lady Drake, to withdraw her amendment.

  6. Lord Sharkey

    My Lords, I was pleased to add my name to the amendments in the name of the noble Baroness, Lady Altmann. Both amendments address the problem of cold calling and pensions. I would, like the noble Baroness, have preferred an outright ban on cold calling just as I would like an outright ban on cold calling for the benefit of debt management companies and for claims management companies. We can deal with banning cold calling for claims management companies later in the Bill, as the noble Baroness just pointed out, and she and I have both tabled amendments to do exactly that. Regrettably, banning for pensions and debt management companies is outside the scope of the Bill.

    The amendments before us, therefore, cannot and do not go that far, but they do offer a pretty good work-around. They would do two things, as the noble Baroness has explained. They would require the SFGB to provide information and guidance on cold calling. They would also require people to have received this information and guidance before taking any action following a cold call.

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    Noble Lords have discussed cold calling on many occasions in this Chamber. On every occasion there has been universal dissatisfaction with the process and universal recognition that it is a menace, yet it still goes on. There has been a 180% increase in the past 10 months alone. There are now 2.6 million calls every month. This is an omnipresent menace. But there is no cold calling for mortgages. We banned that. Successive Governments have never got around to banning cold calling for pensions, for debt management or claims management and I know that the Government have promised, yet again, to ban cold calling for pensions. But, yet again, it is a promise without a delivery date. It is a promise that has no obvious legislative vehicle except this one.

    I still do not understand why the Government are dragging their heels over this or over debt management and claims management cold calling either. I acknowledge that there will be complexities in devising the details of any ban, but it is surely not beyond the ability of the Government to deal with speedily if they assigned the right priority and the right resources to it. In any case, I remind the Minister that we have already held out in these debates the possibility of an enabling clause in the Bill with the details to follow later in secondary legislation. We have had no response to that—all rather disappointing and mystifying. In the absence of any willingness on the part of Government to actually do anything in the Bill, these amendments show how progress can be made. I very much hope that the Minister will respond positively.

  7. Baroness Drake

    I thank the Minister for his reply. I totally disagree with most of what he said. I thoroughly agreed with the bit where he agreed with my analysis, it was just the bit about the amendment not being practical. This will be neither onerous nor expensive, which is really his only argument against it. This is not saying to map every problem that contributes to financial capability or financial exclusion, but to give a report that sets out in the methodology how best to make an impact assessment across government departments when they are pursuing their policy.

    This is not novel; it is a methodology and a discipline that operates in a range of areas. A huge amount of work has already been done. A national strategy has already been created by the work of the Money Advice Service—there is already its capability service. It has mapped the problem. I was rereading it over the weekend. There is no need to reinvent the wheel. A lot of that work exists and it is an organisation that is going into the new organisation. The Bill already gives to the new financial guidance body responsibility for co-ordinating and developing a national strategy. The Government have already given it the heavyweight bit, which is to co-ordinate and develop the national strategy, but ensuring that that strategy is effective and delivered—ensuring that the whole machinery of government is responsive to the challenge—is a methodological challenge in terms of what I am proposing on how you assess the impact so you can take it into account.

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    I do not accept that it is expensive or onerous. It is a challenge of how one guides departments to make those impact assessments. There is plenty of advice and guidance from the NAO, other government departments and other bodies that have given guidance to the Government on how to make impact assessments. If there is such a resistance to making impact assessments, how is the Prime Minister to meet her commitment? If she wants to make the Government function better she has to stand back, look at the problem and make an assessment. All I am saying here is that simply giving a budget to an NDPB and saying, “Get on with developing and co-ordinating a strategy; we as a Government have now discharged our function”, is not sufficient. The whole machinery of government has to be told that when it comes up with its actions or policies that it has to assess the impact it will have on capability and debt. The Government will go on to make their policies, but they have to put a discipline in. Just handing over the more labour-intensive bit to the NDPB, not the least labour-intensive bits that I am suggesting, will not get good outcomes for the country.

    I reject the premise of the Minister’s argument that it will be very expensive and labour intensive to do. A lot of the groundwork has already been done by the MAS. None the less, I beg leave to withdraw my amendment.

  8. Lord McKenzie of Luton

    My Lords, we support the thrust of the amendment, but there is just a query on its precise ramifications which perhaps I may raise now. The amendment states:

    “As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication”.

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    I am not quite sure how that could be caused to happen; that is, where the knowledge of an unsolicited communication is and how that feeds through to encourage people not to take any action until they have considered these matters. When the Minister winds up, she might expand a little on that.

    I certainly support what the amendment is trying to achieve. The idea of taking a power in the Bill to seek to move forward more quickly once it has left this House is certainly worth considering. But I guess that my key message is to the Government. Their response to the consultation document was robust and covered not only cold calling, but we have this equivocation as to when it is going to happen. I find it difficult to understand, given everything that is going on with Brexit, which is changing the world, why we cannot move swiftly to introduce provisions in a vital area where there is clear consumer detriment that is destroying many people’s lives. It would be helpful to have that clarification in the wind-up, and subject to that we support the amendment.

  9. The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)

    Perhaps I may give an indication of my support in principle for banning cold calling of every type by saying that I have given up my landline because so many calls now are nuisance calls. They are about pensions and all sorts of reasons. Apparently I have more accidents in my car than hot lunches. We have all had enough of it and this is an issue which is close to the hearts of many, if not all, noble Lords.

    These amendments seek, under the pensions guidance function, to give the single financial guidance body a duty to provide information and guidance to members of the public about unsolicited communications. I should like to start by thanking my noble friend and all noble Lords for their contributions to this topic at Second Reading and during the first day of Committee. I really do understand that pension scams, and particularly unsolicited communications, have to be dealt with. As I have sought to reassure noble Lords, the Government also take the threat of pension scams extremely seriously and have committed to taking action to tackle the issue. Noble Lords have already made reference to the fact that last month the Government published their response to the consultation on pension scams, and in that document the Government underlined their commitment to bring forward a package of measures designed to tackle such scams.

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    As noble Lords will be aware, the Government intend to introduce legislation in a finance Bill later this year to tighten the rules in order to stop scammers opening fraudulent pension schemes. Tougher measures to prevent the transfer of money from an occupational pension scheme into a fraudulent one will be introduced following the rollout of the master trust authorisation regime in 2018-19. The Pensions Regulator will be given new supervisory measures to authorise and deauthorise master trusts according to strict governance standards, and the Government will consider how the legislation to limit transfers should align with these measures.

    On pensions cold calling, which is the subject of my noble friend’s amendment, the Government’s consultation response committed to bringing forward legislation when parliamentary time allows. I really would like to reassure noble Lords that work is under way to ensure that the ban, which will include emails and text messages, is robust. We will continue to work with stakeholders and those with an interest in this space as work progresses. We hope to be able to outline more about our plans for engagement on Report. I say that, but I also ought to make it clear that, as the noble Lord, Lord Sharkey, has said, while we would love to do this overnight, the truth is that this is not in scope of the Bill. I wish noble Lords could be flies on the wall at some of the meetings I have had with officials from the DWP and the Treasury, and also with ministerial colleagues including the Pensions Minister. We have been searching every which way to find an opportunity to introduce this legislation. We will not be overcome. We are determined to do it as soon as is practically possible. Indeed, it was not until I became a Minister that I realised how hard it is. It is easier for me now to understand, even after nearly 20 years in your Lordships’ House, how difficult it is to get some of these things done in practice.

    I hope my strength of feeling is coming across: we are genuinely working on this as we speak. We are not dragging our heels. There is no lack of willingness. We are absolutely clear that we want to take this forward, but at the same time we need to be really careful about how the legislation is drafted, for example by being careful not to exclude legitimate transactions and so on. I have the result of the consultation in front of me, which sets out in some detail the reasons why we have to be a little bit careful about how this is drafted, but I assure noble Lords that if it was in scope it would be in this Bill. Unfortunately, it is not in scope and we have been given clear instructions on that by all the powers that be who advise us on drafting of legislation in Parliament.

    I turn to the amendment tabled by noble Lords on the pensions guidance function. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions. The noble Lords’ amendment would see the single financial guidance body given a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

    I will take each part of the amendment in turn and will first talk to the duty to provide information and guidance on pensions cold calling. As my noble friend and all noble Lords will be aware, information on spotting, avoiding and dealing with scams is currently provided by the Money Advice Service, TPAS and Pension Wise. Information on pensions scams is also available via the Financial Conduct Authority’s and the Pensions Regulator’s websites. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions, but the amendment would give the single financial guidance body a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

    Under the new body’s money guidance function, which will allow the body to provide information and guidance to enhance people’s financial capability, the Government would expect the body to continue to provide information of this sort. However, the Government believe that the new body will be best placed to determine exactly what information and guidance it provides. It will have the ability to assess the landscape and see what information and guidance is already out there. I agree that information on avoiding financial scams is vital, and, as I have already said, the Government expect that the body will continue the existing services’ good work in this area, but I do not agree that it is necessary to specify this in legislation.

    On the second part of Amendment 42D, which states that the body should,

    “make provision to ensure that members of the public receive this information and guidance”,

    after receiving a cold call, I wholeheartedly agree that members of the public should know where they can go to seek information and guidance if they need it. Of course, the Government would expect that any information or guidance that the body provides is as accessible as possible. However, the amendment would not help to achieve this. In practice, it is not possible or reasonable for the body to be required to ensure—the noble Lord, Lord McKenzie, has said it is quite difficult—that people will come to it for help after receiving a cold call. Having said that, I heard an example of this when I was at TPAS. It was absolutely brilliant. It had all been recorded, of course, so one could hear this woman say, “I think I’ve just had a cold call”. Sure enough, this brilliant adviser—the person giving guidance—said, “I’m very sorry to say this sounds very much like a cold call that you should ignore. Well done for calling us, thank you so much”. This is happening daily, as I saw for myself. The body would not know who had received a cold call unless, of course, they go to the service. Even if the industry had access to this information, the body would not have the power to require the industry to ensure that members of the public receive information before taking action.

    I understand what noble Lords are seeking to achieve with this amendment. However, it would not be helpful to mandate the guidance that the body provides, particularly when there is already a clear expectation that the body should provide it, or to make the body responsible for ensuring that people seek out this guidance. I therefore ask my noble friend to withdraw the amendment.

Amendment 24 withdrawn.

Amendment 25 not moved.

Amendment 26

Amendment 42D withdrawn.

Amendment 42E not moved.

Clause 3 agreed.

Clause 4: Delegation of functions to delivery partner organisations

Amendments 43 and 44 not moved.

Amendment 45

Amendment 26 withdrawn.

Amendment 27

  1. Baroness Altmann

    I thank my noble friend for her answer and for her passion at the beginning of her response. She clearly understands the concerns that have been expressed right across the House. Perhaps we in this House can help to accelerate the process by which we could achieve what she is struggling at the moment to achieve. Let me first respond to the question of the noble Lord, Lord McKenzie, and try to explain that these amendments are actually linked to Amendment 42B. If you have mandatory guidance that has to be taken before anybody can make a decision to access or transfer their pension, then Amendments 42D and 42E allow that to apply to a cold call.

    As the noble Lord rightly pointed out, Pension Wise, or the financial guidance body itself, would not know in advance who had had a cold call and therefore needed to come, but if guidance were mandatory the guidance body would have a duty, as specified in this amendment, to ensure that anyone who had a cold call received advice or came for guidance before they were permitted to transfer the money. The problem with the scams comes when people transfer money from their existing pension elsewhere. So, as I say, the mandatory default guidance in Amendment 42B links in to Amendments 42D and 42E to try to capture the public protection that we wish to achieve.

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    It is, however, important to specify that this body must inform the public and have adequate information about the risks of unsolicited approaches about pensions and about guidance and so on, because the body might think, “Well, if there is another organisation dealing with scams—we have Project Scorpion and Project Bloom, different initiatives going on around government—we do not need to be so cautious about informing the public”. This is the place where we want to make sure that the public is informed about pensions. Having said that, it seems that if we can get the ban on cold calling into the Bill at this very time, perhaps by changing the title of the Bill, or in some other way, with support across the House, working together to find a way that would be acceptable, we would all, including my noble friend, be much more comfortable with the protection we are offering the public. In the meantime, I beg leave to withdraw the amendment.

  2. Lord McKenzie of Luton

    Moved by

    26: Clause 2, page 2, line 34, at end insert—

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    “( ) As part of undertaking its strategic function to improve the financial capability of members of the public, the single financial guidance body must carry out research on a periodic basis, in collaboration with other bodies with an interest in debt issues, to determine—

    (a) the level of unmanageable debt across England, Wales, Scotland and Northern Ireland,

    (b) the causes of unmanageable debt, and

    (c) ways to prevent unmanageable debt.”

  3. Lord McKenzie of Luton

    My Lords, in moving Amendment 26 I will speak also to Amendment 40. These amendments concern unmanageable debt, which we seek to define in Amendment 40—with some trepidation given my last attempt to define something. Amendment 26 would require the SFGB to carry out research from time to time relating to unmanageable debt and to do so in collaboration with other bodies with an interest in debt issues. The focus of the research should be to determine levels of such debt across the whole of the UK, the causes and the ways to prevent it.

    Unmanageable debt is defined to recognise those situations where individuals are not routinely able to, or heading for circumstances where they will not routinely be able to, meet their financial commitments when they fall due. Research into such matters would not be new, but it is of particular relevance given the levels of unsecured personal debt in the UK. Citizens Advice reports that unsecured debt, after falling from its peak in 2008, is now growing faster than incomes and faster than secured debt. It cites an OBR forecast that levels of unsecured debt will return to pre-crisis levels by the end of the decade. These have implications for the individuals and families concerned, as well as the aggregate impact on the national economy. Citizens Advice research shows that unmanageable debt is unevenly distributed, taken as a measure of unsecured debt equivalent to six months or more of a person’s income but taking into account savings. Not surprisingly, those in the lowest income group are three and a half times more likely than the highest fifth to have unmanageable debt, those who are 20 to 29 years old are twice as likely as those who are 30 to 39 years old, and private renters are twice as likely as those with a mortgage.

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    Amendment 26 would require not only that the level of unmanageable debt be recognised but that the causes of the debt and ways to prevent it be determined. That is a more challenging requirement but would reflect changing circumstances over time. Evidence given by the Money Advice Trust to the House of Lords Select Committee was to the effect that, 10 years ago, the problems reported by 69% of callers to its National Debtline were to do with loans, overdrafts or credit cards, but that this percentage has fallen significantly to 42%. However, the service has seen a dramatic 140% rise in calls concerning household debts such as rent arrears, energy and water bills, telephone bills and, as we have discussed, council tax. This analysis was echoed by others, including StepChange.

    We discussed in a previous amendment consequences of the abolition of council tax benefit and the detrimental effect that this has had on council tax debts. Another feature highlighted was the impact of the tax collection practices of different local authorities and how this could impact debts generally. We are, of course, coming on to discuss the importance of a breathing space. It has been suggested that the loss of debt advice and benefit advice services, particularly those funded by local authorities, has exacerbated the problem.

    In seeking to bring research to bear on ways of preventing unmanageable debt we also need to focus on the wider consequences of individuals and families living with unmanageable debt, including family breakdown and poor physical and mental health, as well as on the fundamental issue underlying much of this—low and erratic pay. Research is not only about looking back. The Money Advice Service, together with CACI, published research on the design of a model to estimate the probability of an individual being overindebted. It concluded that the overindebted population is younger and more likely to rent and have children; feels the impact of macroeconomic changes more significantly; and is more exposed to changes in the welfare system. Unsurprisingly, they claim that, together with partners, this research will enable services for overindebted people to be provided earlier to help resolve crises and support them to stay out of debt in the longer term. We know that debt advice can be effective. Research can assist in channelling that advice in the most effective and efficient way. I beg to move.

  1. Lord Sharkey (LD)

    I have a small additional question arising from Amendment 26. As things stand, I understand that the kind of research that it calls for is already undertaken by the MAS and forms the basis of the budget requests made by the MAS and of the distribution of funds coming through the MAS. If this research is not to be done I am curious about how budget requests will be made and how funds will be distributed across the regions.

  2. The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)

    My Lords, I thank the noble Lord, Lord McKenzie, for tabling these amendments. Amendment 26 relates to the strategic function of the body and would add a requirement for the new body to conduct research on levels of unmanageable debt across England, Wales, Scotland and Northern Ireland, the causes of unmanageable debt and ways to prevent it. Amendment 40 then seeks to provide a definition of unmanageable debt. It is right that this House takes great interest in seeking to understand the causes of debt and how the Government can best help those who are struggling. I thank noble Lords again for their important contributions on this matter at Second Reading, in the meetings we have conducted since and in their amendments. I have given them a great deal of thought. I assure noble Lords that the Government take problem debt very seriously.

    We understand, as the noble Lord, Lord McKenzie, has said, that the cost of living can sometimes become too great and that problem debt can be hard to escape and can compound family breakdown, worklessness, stress and mental health issues. The Government are committed to supporting those who are struggling with their finances and, as we have previously outlined, work is ongoing on this area. Indeed, during the Recess I paid a visit to the Money Advice Service to see for myself some of the work that it is doing in this regard, particularly the different areas of research it is carrying out. I also take this opportunity to acknowledge the work that Citizens Advice is doing in this area, and particularly the report they published last week, Stuck in Debt, which highlights the problems faced by many. The report highlights the risk of people taking on debt that they cannot repay and clearly shows the impact of unaffordable debt.

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    The strategic function of the single financial guidance body will be critical. It will give the new body the ability to work with others in the financial services industry, the devolved authorities and the public and voluntary sectors to identify the most pressing issues and possible interventions in financial capability, personal debt management and financial education for children and young people. I understand the very worthwhile aims of this amendment; however we do not believe that it is necessary to specifically reference one area of research in legislation. Clause 2(3) enables the body to conduct research on,

    “anything that is conducive or incidental to the exercise of its functions”,

    so it could conduct research into anything that noble Lords have raised this afternoon, for example. Furthermore, the body will, under its strategic function, be expected to work with stakeholders across the financial services industry, the devolved Administrations and the public and voluntary sectors to share and pool research evidence and knowledge among each other to inform the national strategy on financial capability.

    Let us not forget that the whole purpose of this new body is to improve the financial capability of the public, through both its delivery and strategic functions. In order to deliver its objectives and functions effectively, this body, like any other delivery organisation, will need to conduct research to understand the issues it is addressing, test and learn new approaches to determine what works and continuously improve the services it is providing. I would find it hard to believe that this body would not conduct research on the very issues that the noble Lord has raised. The question here is not whether the body should conduct research on this and other matters—the Government are clear that, of course, it should. The question is, is it necessary to have it defined in primary legislation.

    There are several topics that the body may wish to look into, but I am concerned that specifying just one could risk limiting its ability to look widely and strategically at issues across the whole sector. It must also have regard to emerging issues in the future. Amendment 40 seeks to provide a definition of the unmanageable debt levels that the body would be tasked with researching under Amendment 26. The noble Lord’s amendment undoubtedly highlights some of the key characteristics displayed by those who are struggling with their finances, such as being able to make only minimum repayments on outstanding credit commitments, difficulty in paying for essentials and a reliance on credit. The question here is not whether the Government agree with this definition; it is about whether this should be defined in legislation. As I have already explained, the Government believe that the new body should have the ability to choose the specific topics it researches in relation to its functions, and that these should not be specified in legislation.

    Should the new body choose to research the causes and effect of unmanageable debt, it should also have the ability to define what it is researching. Although I understand the intention behind the definition suggested in the noble Lord’s amendment, defining unmanageable debt in legislation could unintentionally limit the scope of the body’s research. It is envisaged that the body will continue to support the aim of reducing problem debt, and this is clear in Clause 2(7)(b), which states that part of the strategic function is to improve,

    “the ability of members of the public to manage debt”.

    As I have said, the Money Advice Service and others already conduct significant amounts of research into the causes of overindebtedness. They are doing a great deal of work at the moment on how to support the aim of reducing problem debt in the first place. Indeed, I had an extensive discussion about how to do this in a much more strategic way; I think it was the chair of MAS who said that if someone falls off their horse, it is not just a case of looking at how they get back on it; it is how they learn to ride. It is about people’s whole approach, from an early age, to managing their finances. We envisage that the fantastic work the organisation is carrying out in research will be transferred and will extend and continue through to the new body, so I cannot quite accept the premise of the question asked by the noble Lord, Lord Sharkey, that if the money is not spent on research, how is the budget assessed. If that were the case, it would go to the core issue of whether the body is functioning: a crucial part of its function is to ensure that the body is looking at and thinking about how to improve people’s ability to manage their finances through life.

    I know that a particular focus of research at the moment is to do with people’s attitudes; not just how they manage their debt in the short term, but their whole attitude to money and how they manage it going forward. I have various pamphlets here and I found it incredibly encouraging to learn about what we are doing for young children, going through to the elderly. Of course, as always there is lots more to do but the whole tenor of my response is that we should not restrain or constrain this body by tying it down, by listing or being too prescriptive in primary legislation. I hope that, after considering the points I have raised, the noble Lord will withdraw the amendment.

  3. Lord McKenzie of Luton

    My Lords, I thank the Minister for that sympathetic reply and for the detail contained in it. The thing I am struggling to understand is why, simply because the Government have particularised an approach in the Bill, that precludes any other approach to research or indeed any other type of debt to be the subject of that research. But this is probably not the time to pursue that in great detail. I simply do not see why the amendment cannot be accepted without impairing the argument the Minister has made for how she sees research and the importance of it. Unless she wants to say anything more, I beg leave to withdraw the amendment.

  4. Lord Stevenson of Balmacara

    Moved by

    45: Clause 4, page 3, line 46, at end insert—

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    “( ) When arranging with a primary SGFB delivery partner to carry out on its behalf the debt advice function, the single financial guidance body may contract only with organisations and companies which are established for charitable or not-for-profit purposes.”

  5. Lord Stevenson of Balmacara (Lab)

    My Lords, it is well past my bedtime and I will therefore be very brief. I think I can be. I was going to say that these are two sides of the same coin but there are three amendments. Let us be imaginative and say they are grouped around a common theme, which is again to get on record the idea that the work that is going on either directly or through the SFGB must ensure that the services delivered are free at the point of use. That is the main point of Amendment 45, which restricts the operations to,

    “companies which are established for charitable or not-for-profit purposes”.

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    It may be argued, and I think I would accept, that many companies operate in a way that has different branches and it may be that the particular branch which deals with, for example, debt advice might be a not-for-profit operation. Provided it is understood that the advice is always free, the actual status of the company is probably of a lesser order and I would understand if the Minister were of a mind to mention that in his very brief response.

    Amendment 46 deals with how the objective attaching to the SFGB also applies to the overall system, in the sense that it would be perverse if the arrangements were such that the initial interactions with the partners and organisations working with the SFGB were free at the point of use but that these were also referring clients to profit-seeking or charging operations. This is primarily a probing amendment but, again, I am looking to make sure that the advice circle is complete by retaining this free-at-the-point-of-use idea.

    Amendment 47 picks up the possibility that with regard to the general governance arrangements that are set in place—which the Secretary of State has responsibility for, as we have learned this evening—the FCA may have an involvement but the single financial guidance body certainly has an arrangement for making sure that governance is properly arranged and the level of accountability is appropriate. One might ask why that was necessary but it would be a rhetorical question and I do not expect a lengthy response. Given that the delivery partners are being supervised by the FCA in most cases, and certainly where clients’ money is concerned, it is a requirement that they be authorised by the FCA. Given that most of these are charities and therefore also subject to the regulatory requirements of the Charity Commission, it is unlikely that the SFGB would be in a situation where governance arrangements were falling short of absolutely perfect. Again, reassurance from the Minister would be most welcome. I beg to move.

  6. Baroness Drake

    Moved by

    27: Clause 2, page 2, line 38, at end insert—

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    “( ) to improve the ability of members of the public to plan for and address sudden variations in income,”

  7. Lord Young of Cookham

    My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving Amendment 45 and then demolishing it, which saves me the task of so doing. I confirm that we are absolutely clear that any help funded by the new body will be free at the point of use. The difficulty we have with his amendment is that it may be appropriate for the body to enter into arrangements with organisations which provide free-to-client advice but also make a profit elsewhere. He made it clear that as long as it is free at the point of use to the client, he was relaxed. That deals with that amendment.

    Turning to Amendment 46, we agree it is important that delivery partners refer members of the public to additional help when they are unable to provide the information themselves. The difficulty with the amendment is that it prevents delivery partners referring members of the public to the most relevant source of help in the first instance. For example, if a member of the public needs legal advice, we do not believe that delivery partners should be obliged, as the amendment requires, to refer that individual back to the SFGB. They should be free to refer that person for appropriate legal advice.

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    Finally, I may need to write to the noble Lord on Amendment 47. Given the SFGB’s relationship with government, it would be inconsistent with the precedent set by other arm’s-length bodies if the sponsoring department sought to interfere with, or have direct involvement in, the contractual arrangements that the body seeks to enter into. But I assure the noble Lord that as an arm’s-length body, the SFGB will be required to comply with government policy on public procurement. The sponsoring department will support the SFGB in dealing effectively with any issues that may arise in the area of delivery partner governance and accountability. If the noble Lord wants more information on that, I would be very happy to drop him a line. Against that background and given the hour, I hope he will be able to withdraw the amendment.

  8. Baroness Drake

    My Lords, Amendment 27 adds an objective for the new guidance body,

    “to improve the ability of members of the public to plan for and address sudden variations in income”.

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    Clause 2 sets out that the new body’s money guidance function is to provide,

    “information and guidance … to enhance people’s … ability to manage their own financial affairs”,

    but the effective exercising of that function must involve improving people’s ability to manage income shock and strengthening households’ financial resilience. Improving resilience includes assisting households both to manage better once in the grip of a financial crisis or debt and to anticipate and protect against financial crisis or shock through a savings buffer, insurance buffer or some other means. Prevention and cure for households in financial difficulty are both within the remit of the financial guidance body and both require attention.

    Evidence of weakening financial resilience within the UK population is abundant. Eight out of 10 people have little or no savings to pay an unexpected bill of £300. The Money Advice Service’s Milestones & Millstones report in 2015 showed that 3.3 million people face an income shock each year. The work, health and disability Green Paper, Improving Lives, reveals that each year almost 2 million people suffer a prolonged sickness absence from work caused by cancer, accident or other major illness, which usually leads to a sudden and significant fall in household income; and 1 million experience divorce, separation or death of a partner, again, often leading to a substantial fall in household income.

    Many people lack the financial resilience to weather such a storm and consequently any children they have will also be bruised and buffeted. According to the Children’s Society, financial shocks leading to problem debt have a significant impact on children’s well-being, with many struggling with school and suffering anxiety or depression as a result of enforcement action by creditors. A recent report by Aviva, Protecting Our Families, suggests that three in 10 UK adults have seen their finances hit as a result of temporary or permanent leave from work due to ill health, a cancer diagnosis or death within the family; 31% of adults took forced leave from work, of which 77%—12 million people—saw their income drop by an average of 24%. The Aviva report also reveals that 27% of parents with dependent children have suffered a health crisis, with 91% of these suffering financially. They are quite stark figures. I was quite surprised at the volume when I started to drill down into this.

    At Second Reading we heard from the noble Lord, Lord Holmes of Richmond, that by 2020 50% of us will have had or will experience a cancer episode in our lifetime, yet only one in 10 will tell their bank or building society that they have a cancer diagnosis. The noble Lord recounted the experience of John—mid-40s, mortgage, diagnosis of cancer—who can get no engagement from the financial services providers to help him manage through this financial crisis. This experience is consistent with the FCA’s observation in its Occasional Paper 17, Access to Financial Services in the UK, which specifically identified the poor access, particularly to insurance, that people who have experienced serious illness suffer. It cites the statistic that 2.5 million people living with and after cancer—forecast to rise to 4 million by 2030—would find themselves in the non-standard category for a financial services “imperfect customer”. It went on to define what that meant but I think the House is quite capable of determining what a phrase like that means. Lynda Thomas, chief executive of Macmillan Cancer Support, observed:

    “Every day, I see people, and I hear of people, whose finances have been really badly hit because of their cancer diagnosis. What our frontline experience shows us is that people affected by cancer find it really, really difficult to access ... all insurance products”.

    So many people do not have a savings or insurance buffer or other back-up. Just over one in four have savings sufficient to cover three months’ loss of earnings. State benefits help but they cannot fill the gap. Housing payments are often restricted and other regular outgoings, such as debt payments, are not covered. In the south of England there are now many towns and cities where housing benefit will not cover the rent of any private property. Three out of four private sector workers now either work for an SME—a small or medium-sized enterprise—or are self-employed so they may lack access to the more generous employer-provided help when illness or bereavement hit. Means-tested benefits provide only limited support for housing costs, with a cap on the amount payable for rent; owner-occupiers get no help with mortgage interest for the first nine months, and imminent changes mean that any help after that will be only a loan. The social security system does not yet fully address the significant changes in the labour market or the lack of support from the financial service providers.

    Less job security in the market and lack of financial resilience in dealing with life events can lead to serious financial hardship and further health problems, debt, employment problems and demands on the health service. Again, the MAS financial capability survey reveals how a significant proportion of the population is not prepared for a rainy day or life event. Research by bodies such as the CII and Which? suggests that few people—perhaps as few as one in five—pay significant attention to protecting their income when unable to work, yet the consequences of failing to plan for such income shocks can be severe and long-lasting, often contributing to problem debt. Income shocks and their consequences can hit those who thought they were in a steady job with a steady income.

    The new body should engage with the need to plan for such shocks and signpost products, services, information and tools to help the public understand the risk, how to plan for it and how to cope with it when it happens. It could identify the ways in which financial services markets could make a greater contribution to assisting households to manage income shocks, an issue which the FCA has recently highlighted as a problem. As the noble Lord, Lord Holmes, explained so clearly at Second Reading, the market can show little engagement or duty of care when people are at their most vulnerable. Improving the ability of people to plan for and address income shocks is an important part of building financial resilience. The new guidance body can assist in improving the ability of members of the public to plan for and address such variations in income. I beg to move.

  9. Lord Stevenson of Balmacara

    I thank the Minister for his comments and his brevity. Hansard will have an interesting time trying to unscramble all our mixed-up shorthand for the body that is still yet to have a name. I wish we would get a name quickly and then we would not have to worry about “F”, “S”, “G” and “B”, and my teeth falling out. I will read Hansard very carefully, and I am sure that any additional information that might be provided by letter will be most welcome. I beg leave to withdraw the amendment.

Amendment 45 withdrawn.

Amendments 46 and 47 not moved.

Clause 4 agreed.

House resumed.

House adjourned at 10.11 pm.

  1. Lord Sharkey

    My Lords, I shall speak to Amendment 27A in this group. This amendment makes a very small change to Clause 2(8)(b), which sets out the objectives of the SFGB. The second objective currently reads,

    “to support the provision of information, guidance and advice in areas where it is lacking”.

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    We agree with this objective, but we feel that it does not go far enough. It is good to support the provision of information, guidance and advice, but it is surely better also to support the use of this information, guidance and advice. Provision is necessary, but it is not sufficient. Provision without use risks wasting time, money, effort and opportunity. This amendment reworks that paragraph by adding “and use”, so that it would read: “to support the provision and use of information, guidance and advice in areas where it is lacking”.

    I can illustrate the point by talking briefly about Pension Wise. The service provided by Pension Wise is excellent: 94% of users said they were likely to recommend the service to others; 91% were either very or fairly satisfied by their experience; and 85% said that Pension Wise helped to improve their understanding a great deal or a fair amount. But the problem is that the level of take-up of this excellent service is very low. Research published in June by the Treasury and the FCA suggested that just 7% of eligible pension savers planning to retire in the next two years received guidance from Pension Wise.

    Low take-up, both of public and private advice and guidance, would not necessarily be a cause for concern if UK pension savers were generally engaged and well-informed, but they are not—the opposite is the case. Financial capability in the UK, as we have been hearing this afternoon and this evening, is poor. The Financial Advice Market Review baseline report found that just 27% described themselves as capable of sorting out their own finances, and 34% of those who had purchased a financial product later regretted the decision.

    Specifically, there is a problem with the levels of knowledge and awareness about pensions and retirement. The International Longevity Centre UK, under the aegis of the noble Baroness, Lady Greengross, who is not in her place at the moment, has published extensive research on consumers’ understanding of retirement planning. In 2015, only half of those with a DC pension said that they understood, either quite well or very well, what an annuity is. Only 3% said they understood what income draw-down was.

    There is not just a lack of understanding; there are also dangerous misunderstandings. July’s PLSA survey found that over half of DC pension savers incorrectly believed draw-down products offered a guaranteed income in retirement. Perhaps worse, 25% believed draw-down carried no investment risk at all. This illustrates that the need for guidance and advice is clear. More accurately, the need for people actually to use guidance and advice is clear and pressing.

    This is the problem that Amendment 27A sets out to address. The amendment requires the SFGB to have the objective of promoting the use of guidance and advice, not just the provision of guidance and advice. This is a simple but vital change, and I hope the Minister will be able to agree to it.

  2. Lord Stevenson of Balmacara

    My Lords, I support the amendments in the names of my noble friend Lady Drake and the noble Lord, Lord Sharkey. The noble Lord’s rather graphic descriptions make it very clear that there is a bit of a problem here in terms of how one ensures that any body—not just the new body we are talking about today—is able to get someone to do something which they clearly are not willing to do, and how to engage with, and learn from, the experience of taking out the loans, or preparing for the retirements which they are going to encounter later in their lives. I suspect that the Government will come back and say that, while the wording is admirable and something that they could support, they are not quite sure how it could ever be measured, or whether “use” is in fact the right term here, because getting people to the point where they recognise that they have a problem is not the same as getting them to do anything about it.

    When I was working at the StepChange Debt Charity, one theme that we developed in my time there was that there was a sense in which those who had responsibility for activity in this area relied on generic, rather than specific, advertising or advocacy of another form. We took the view that was not where action was likely to be most profitable. What worked was this: when you had someone going through a really serious incident, sad and difficult though that was, the learning that took place as a result of that process was so incredible and so obvious that it was almost worth going through the process. We all have similar experiences with our own friends and family. It is only when reality sinks in, that the credit card bills do not get magically paid by themselves and that the bank is not going to continue to provide the money-tree support that it has done in the past, that you have to learn how the world actually works and what you are going to do about it. I wish the noble Lord, Lord Sharkey, well with his amendment, but I think it probably needs a bit more work before we have got the right balance between knowledge and understanding, in terms of information, guidance and advice, and the practical learning that can come from actually operating in that world.

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    On my noble friend Lady Drake’s amendment, which we definitely support, in some senses our debates this evening have run the slight danger of demonising debt as a feature of our society today, whereas most of us need to borrow money at some points in our lives. For many people, it is an affordable way to make large purchases or to balance competing financial priorities. The problem is when one does not plan for or anticipate, but then experiences, unexpected events. We have had examples given, and the numbers or statistics are incredible. A recent report published a month or so ago gave two headline figures, which I will focus on rather than go into the detail. In Britain today, almost 2 million people a year suffer an illness of such length that they are absent from work such that, as a result, their income is reduced. That is a very large number of people. Another 2 million people experience job losses or loss of overtime or condition pay in other ways. In terms of the overall working population of about 23 million or 24 million, nearly 4 million—almost one-sixth—are affected by that. In a sense, it is not surprising that we are having problems in this area, and it is something that we need to think about.

    On the question whether income shocks are sufficiently important to require changes to the Bill as currently drafted, it will be interesting to get a response. I think that this issue has had less attention than it needs, and the amendment plays back into the points made by my noble friend Lady Drake about the impact on other persons who would otherwise not be affected, such as young people, those in care and those who are dependent on those who are affected. The amendment also brings back all the points that we have been hearing about in terms of mental health, those who suffer from disability and vulnerability in other ways, and those who are preyed on by others who wish to make them do things that they do not want to do. It brings together a number of the issues we have been talking about this evening and focuses on the need to have some sort of balance and arrangement.

    Finally, the amendment also picks up the point about whether the market could provide, if left on its own and not subject to any exert or constraint. With respect to the noble Lord the Minister—our aviator for this evening—I think he is being incredibly naive about this. The noble Baroness, Lady Kramer, is absolutely right. The competition imperative imposed on the FCA drives out the possibility that there is any agency around, not in central government, which could provide the changes that are necessary in order to provide these services. Left to their own, financial services will never come up with that. Financial services, without any imperative to take into account a duty of care, or fiduciary duty as we call it, will never see it as their responsibility to bring forward the insurance, the payment protection and other issues that are so necessary to try and underpin not just the income shock issue but the broader issue as well. Therefore, to rely on a simple transparency and information flow as being the way to do that is just naive.

    Take the example—I have used this before, but I make no apologies for doing so again—of the payday loans scandal that this House had so much to do with, with notable contributions from all sides of the House, including the most reverend Primate the Archbishop of Canterbury. We took the view that the existence of those who were offering payday loans was on such a scale that action needed to be taken. The Government initially resisted that completely, saying that what we needed was more transparency, but the final result was that action was taken. That action was based on what the FCA could do, and it is defective. What the FCA said to us, in essence, was that its vision of cleaning up the payday loans scandal was to create a fairer market in which there were fewer operators, but that they would operate efficiently at a reasonable profit margin and be well capitalised. At its best effort, at the end of the day that did not stop loans of more than 1,000% APR from populating this market. Recent research from the StepChange Debt Charity, which I had the honour to chair until a few years ago, shows that nearly 20% of people still rely on high-cost credit, including payday loans, to pay their basic end-of-month bills. This is outrageous, and I do not think that the market works to the benefit of consumers.

    We will need to come back to a lot of the issues raised today by my noble friend Lady Drake and others, but it is really important that the Government get a grip on this.

  1. Baroness Buscombe

    My Lords, perhaps I may address Amendment 27, in the name of the noble Baroness, Lady Drake, and Amendment 27A, in the name of the noble Lord, Lord Sharkey. The first of these amendments seeks to include an additional objective for the single financial guidance body, which is,

    “to improve the ability of members of the public to plan for and address sudden variations in income”.

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    The second amendment would amend the body’s second objective so that the body must support the provision “and use” of information, guidance and advice in areas where it is lacking.

    I thank the noble Baroness and the noble Lord for their contributions on the important topic of financial capability during Second Reading, and during the first day of Committee before the summer break. For instance, I agree with the noble Baroness that many people in the UK need help with boosting their financial resilience. People need to know how to plan for and address sudden variations in income, and she gave a number of very pertinent examples.

    The Money Advice Service is involved in some important work in this area. In developing its financial capability strategy, MAS supports the work of a wide range of organisations across the public, private and voluntary sectors. As I have said, the strategy looks to address not just people’s skills and knowledge around money management but the attitudes and motivations that can hold them back. As I stressed on a previous amendment, I believe that that is truly important in this exercise.

    To take an example, some of MAS’s “What Works” projects targeting young adults are focused on helping them adjust to the income shocks and financial implications brought about by the life transitions they experience, as they move between welfare and work and/or further and higher education. For example, MAS is funding a project with The Mix, a leading national digital youth agency and helpline, to explore how we can engage young adults with money guidance as they make such life transitions between post-school education and the labour market. MAS’s research shows that this work is vital. Almost one-third of UK adults have experienced a serious financial shock in the past five years, such as losing their job or being unable to work due to injury.

    The noble Baroness, Lady Drake, specifically referenced cancer. In line with its objectives to focus its efforts on the most in need, the body should, as part of its money guidance function, provide support for those who fall into financial difficulty as a result of cancer. More broadly, as part of its objective to increase the financial capability of members of the public, the body should help to build individuals’ ability to deal with such income shocks.

    We also know that there is a gap between the number of people experiencing unexpected events and those who have a plan in place to safeguard their finances. Research, again by the Money Advice Service, shows that three-quarters of households receive an unexpected bill every year but that 26% of working-age adults have no savings to fall back on, while a further 29% have less than £1,000 saved. That is why we have provided that the new body should have the money guidance function, giving it a duty to provide information and guidance designed to enhance people’s understanding and knowledge of financial matters, and their ability to manage their own financial affairs. The Government would therefore expect that the duty proposed by the noble Baroness’s amendment—

    “to improve the ability of members of the public to plan for and address sudden variations in income”—

    would inherently be addressed by the money guidance function.

    The MAS research that I previously referenced is a clear example of the type of work that the new body would be expected to carry out under its money guidance function. Clearly, enhancing people’s understanding and knowledge of financial matters must include both expected events, such as retirement, and the more unexpected, negative income shocks caused by events such as a job loss. This also includes financial education initiatives aimed at children.

    In the same vein, I reassure the noble Lord, Lord Sharkey, that the body will support members of the public to use information, guidance and advice under its current statutory functions and objectives. This is because the ability to use information, guidance and advice is at the heart of building financial capability and, therefore, already provided for within the body’s statutory objectives. To be more specific, the provision of help to support members of the public use information is implicit in the money guidance function and the body’s first objective, both of which are designed to enhance people’s understanding of financial matters and their ability to manage financial affairs generally. My view is that the objectives set out in the Bill, alongside the money guidance function and the strategic function, already allow the body to support people so that they are better able to deal with income shocks and to use information, guidance and advice.

    Given a number of things that noble Lords have said this evening, it is important to add to this debate some of the initiatives that the Government themselves, and government creditors, have in the support systems that are in place for those struggling to repay their debts. We have to look at this in the round, and departments have taken steps to ensure that they collect debt in a responsible way. For example, HMRC can put what we call a time to pay arrangement—TTP—in place, which enables a debtor to pay the debt in affordable instalments over time. These arrangements are entered into on a case-by-case basis and tailored to the ability of the customer to pay, taking into account their circumstances.

    As another example, the Department for Work and Pensions will always look to introduce a sustainable repayment plan that is bespoke to the individual’s circumstances. Its existing approach includes the provision of breaks in debt repayments or reductions in the rate of repayment for individuals who are experiencing hardship. There are a number of other examples, but as a final one the DWP has also established personal budgeting support for universal credit, which aims to prepare all claimants for the financial changes that universal credit brings. The need for budgeting support is assessed for all claimants at the start of the claim and support can be requested at any time. I include these initiatives at this stage because it is important to recognise that we are creating a framework for this body to work within and develop, using its skills and expertise.

    We are grateful for these debates because to have noble Lords stress, and explain in Hansard, their concerns with regard to the kind of work that this body should undertake will, I am sure, be enormously helpful in the development of its strategic functions. On that basis, I hope that the noble Baroness, having heard this explanation, will withdraw her amendment.

  2. Baroness Drake

    I thank the Minister for her sympathetic reply. Sadly, the path of life does not always run smoothly. Illness, bereavement, divorce and unemployment can intervene and be quite devastating in their impact. The market can be very reluctant to deal with people in those vulnerable situations. This is something that the FCA observed in its recent paper on access to financial services. It recognised that its remit does not allow it alone to deal with this situation in the market, for the very reasons that the noble Baroness, Lady Kramer, observed, and that addressing these issues needs a wider approach.

    The main purpose of my amendment was to highlight the need for the guidance function to help people address the need to plan ahead and anticipate the preventive approach as much as the curative approach. I thank the Minister for her reply, and I beg leave to withdraw the amendment.

Amendment 27 withdrawn.

Amendments 27A to 30 not moved.

Amendment 31

  1. Lord Stevenson of Balmacara

    Moved by

    31: Clause 2, page 2, line 44, after “organisations” insert “and prioritising the allocation of resources to front line advice and guidance delivery”

  2. Lord Stevenson of Balmacara

    My Lords, I think I can be relatively brief because I have heard both noble Lords who have spoken for the Government express their concern that in some of the amendments we have already discussed, we are overloading the new body to such an extent that it will become diverted from its main purpose. This amendment is in that vein, so I am sure it will commend itself. Indeed, it may be our first hint that the Government are listening and willing to work with us on these matters—we have not had much success until now—to ensure that resources available not just as a result of efficiency savings, but because of a conscious decision on behalf of the management of the new body, mean that front-line activities and services are what counts. In recent years, some of the work of MAS in its current and previous incarnations, has been criticised, however unjustified, in that the money was not spent well.

    Before I finish what I promise will be a very short speech, I wish to flag up that we have not really had a chance, so far, to discuss in any detail the implications of the new financing arrangements for the new body which are embedded in the Bill. At this stage, I do not think we have a particular concern that would be addressed by an amendment, but I hope that at some point, at the Dispatch Box or perhaps by letter, we could have some information on the Government’s assessment of the changes being made. Noble Lords will be aware that the Bill changes the fundamental arrangements under which the current MAS is funded. At present, MAS is an independent body which is related to the FCA, to the extent that its business plan is reviewed—I am summarising to make the point—and the funding required for the year is agreed; it is then levied directly from the companies in scope to the FCA and passed directly from the FCA to MAS. In future, the Treasury will inform the FCA of the moneys it judges will be required by the single financial guidance body. The FCA will raise a levy on the companies under the present arrangements, but that money will not go to the new financial body directly but back to the Treasury, which will adjust the DWP’s baseline RAB grant for the year in order to allow it to make a grant to the single financial guidance body. That raises all sort of questions about why the Government decided to do this. We had an offline discussion about this but we did not get satisfactory answers, so I would like this detail.

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    I speculate—I know it is wrong to do so in the circumstances of this debate—and I worry about the implications of things such as Barnett. Since this is now a tax on financial companies being paid into the Consolidated Fund, then being paid across to DWP, in effect, and then being issued to a non-departmental body, we are talking about public expenditure to be recorded in the books as such, and there will be requirements in the national regions for their funding to be increased pro rata. I wonder about that. Is it really the most efficient way of doing this? I am sure there will be an argument on that.

    My worry is that companies will be concerned that the funding they are used to paying to the FCA will be added to by what is in effect a tax on business. There is an issue about how that is managed in making sure that information gets out correctly. For those who are currently funded by those very same companies by direct application or through some system such as the fair share agreement, there is obviously a worry that the new funding mechanisms will impose an additional strain on companies that might not wish to continue to fund at the present level. I am sure there are good reasons why the Government have decided to go down this route, but I do not think I have heard them properly and I would be grateful if today or in the near future, we can get some information on that. I am speaking from the perspective of my former chairmanship of StepChange, but this affects other bodies such as Citizens Advice, the Money Advice Trust and Christians Against Poverty. As a result of the Barnett implications, the situations in Scotland and Northern Ireland are going to be considerably more complex than is set out in the Bill.

    Having looked at the general financial arrangements, the focus of this amendment is to change the wording of the Bill to make it explicit that the objective is to direct as much funding as possible to front-line advice and guidance, which will be free at the point of use. This issue was raised by the Treasury Select Committee in 2013, and there is a good case for the Government’s giving the amendment serious consideration. I beg to move.

  1. Baroness Buscombe

    My Lords, I shall cut straight to the quick, as they say, with the noble Lord, Lord Stevenson, and say that I will be very happy to discuss the issue of expenditure in detail. It is covered in Clauses 8 to 10, which I think we will be covering on day three in Committee. That said, I want to address this amendment in full and in so doing will be touching on the issue of expenditure, in broad terms, in the provision of services and so on.

    I thank the noble Lord for tabling this amendment. Amendment 31 proposes that, as part of its objective to ensure that information, guidance and advice be provided in the clearest and most cost-effective way, the single financial guidance body prioritise the allocation of its resources to front-line delivery services. As the noble Lord noted at Second Reading, we need to learn lessons from our experience when the Money Advice Service was set up. One of those lessons is to ensure that this body has a clear focus on front-line services and that delivery of those services should be its priority. The legislation places a duty on the body to have regard to a range of objectives in exercising its functions. The objectives as they stand collectively prioritise the body’s activities on meeting customer needs and working collaboratively with other financial guidance and debt advice providers to meet those needs.

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    In restructuring the public financial guidance landscape and creating the single financial guidance body, the Government want to provide a more joined-up, customer-focused approach to the delivery of public financial guidance. In the Government’s response to the consultation on creating a single financial guidance body, we were clear that:

    “By rationalising the provision of services, the government expects there to be long term operational efficiencies that will mean more funding can be channelled to front line delivery of debt advice, money and pensions guidance.”

    The new body will need to harness the opportunities created by bringing the three existing services together and be innovative about how resources generated by rationalisation can be utilised to best effect in delivering better services to the public.

    We do not want the body to spend unwarranted sums on, for example, untargeted marketing. The Government were clear on this in our consultation response. Instead, we want the body to link up with industry, the voluntary and public sectors and the devolved authorities to promote its services in a targeted and value-for-money way.

    However, this does not mean that the single financial guidance body should not look to devote resources to investing in other activities where to do so would be in the interests of its customers. For example, in discussing previous amendments, we have already been talking about investing in research that builds an evidence base on matters such as what type of front-line interventions have the highest impact for customers. This sort of activity will help the body design and target its front-line services more effectively.

    We want the body to keep pace with developments in people’s financial guidance and debt advice needs. We want it to evolve and adapt in line with technological advances, so that its services continuously improve. I do not think any of us want the body to stagnate and fail to deliver what people need. Requiring the body to prioritise its allocation of resources to front-line services could do that.

    Clause 2 sets a framework within which we want the single financial guidance body to use its expertise, skills and knowledge and to have the flexibility to design its services so that they meet the financial guidance needs of UK citizens now and in the future. We should also remember that the body has a strategic function to work with others to support and co-ordinate the development of a national strategy that will aim to improve the financial capability of members of the public, their ability to manage debt and the provision of financial education to children and young people.

    This is not a front-line delivery service, but it is a critical function, and the body will need to allocate resources to it. The strategic function of the body will bring together the body, the financial services industry, the public and voluntary sectors, and the devolved authorities to develop joined-up plans and activities that are more likely to deliver improvements in financial capability than activities undertaken by each party individually. I hope the noble Lord, Lord Kirkwood, heard what I just said. We very much take on board that it is really important that we involve, as far as we can, devolved authorities in this and work with them. Debt advice is separate, of course, but it is very important that we all work together on guidance, for example.

    I do understand the concerns of the noble Lord, Lord Stevenson. It will be important that the governance and accountability arrangements for the body are transparent and robust. It is important to keep in the forefront of our minds that, as a statutory non-departmental public body, it will be accountable to Parliament for its activities, and the Department for Work and Pensions will be the sponsoring department.

    Key elements of the body’s accountability and governance arrangements are set out in the Bill, including the requirement to prepare a statement of accounts in respect of each financial year, which must be laid before Parliament. It must also inform Parliament of its activities and expenditure through an annual report that must be published. Here, I reference the question previously posed by the noble Lord, Lord Sharkey, about what happens if certain money is not spent. This should all become clear in its annual report.

    The relationship between the single financial guidance body and the Department for Work and Pensions will be set out in a published framework document that will follow the principles in the Cabinet Office’s Partnerships between Departments and Arm’s-Length Bodies: Code of Good Practice and Her Majesty’s Treasury’s Managing Public Money. The framework document will also provide further details of the governance arrangements under which the body will operate, including requirements for preparing, securing approval for and publishing its corporate and annual business plans.

    The single financial guidance body will deliver guidance which supports the policy of both Her Majesty’s Treasury and the Department for Work and Pensions. Although the Department for Work and Pensions will be the sponsor department, both the DWP and Her Majesty’s Treasury have responsibility for ensuring the body receives the support it needs to deliver its statutory functions in an effective and efficient manner that meets the needs of citizens.

    As I said at the beginning of this debate, we will go into further detail on the funding at a later stage of Committee. On that basis, I urge the noble Lord, Lord Stevenson, to withdraw his amendment.

  2. Lord Stevenson of Balmacara

    I thank the Minister very much for that full and considered response. I look forward to the discussion and wait to be enlightened as to the intricacies of international and national funding across the various parts of the United Kingdom that will come together to cement the changes that have been made.

    On the broader question about efficiency and effectiveness and the objectives, can I just check one point? A simple nod will suffice. Given that the body is likely to be judged to be an NDPB—because that is an objective test after the body has been set up, not something that one can assert beforehand—and given the nature of its relationship to its sponsoring department, will it in fact both be audited by and subject to periodic review by the National Audit Office? I did not get a nod—maybe we will need more information. But I get the sense that that is correct, and will be happy with a later response on that.

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    At some point we might also have a discussion about the role of Parliament in this, which would be helpful. Clearly, the PAC will look very closely at the NAO, but it is often necessary to make sure that the DWP Select Committee is also engaged, because Parliament’s role is most effective, as already referred to, through committee work. With that, I beg leave to withdraw the amendment.

Amendment 31 withdrawn.

Amendment 32 not moved.

Amendment 33

  1. Lord Stevenson of Balmacara

    Moved by

    33: Clause 2, page 3, line 5, at end insert—

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    “( ) The single financial guidance body should seek to ensure that all communications with individual members of the public about their services are clear as to whether they are receiving advice or guidance, as defined in this section.”

  2. Lord Stevenson of Balmacara

    My Lords, I will also speak to Amendments 34, 36 and 37. I am afraid this is quite a wide-ranging group, so I may have to put a little time into each of the amendments. We are pointing in slightly different directions here, but there is a common theme, so it is useful to have them together in one group.

    We start with our old, standard question about what is advice and what is guidance. The Government are beginning to get themselves into rather bad habits here, if I might be so rude as to suggest that more thinking needs to be done. I am not sure whether other Members of the Committee will also have had the background note to all Peers on defining advice and guidance that I got at 3.46 pm this afternoon. I have not had time to look at it. It was circulated from the Government Whips’ Office. It is quite helpful, and I have been reading it in the interstices of the debate today but, obviously not wishing to miss a word from either of the Ministers or from others participating, I have not been able to focus on it entirely. However, although I look forward to what the Minister may say in response, if I judge it correctly it repeats, in essence, the wording that she used at Second Reading and in earlier stages of Committee on the difference between advice and guidance. I accept that that is probably as far as we are going to get on this, as it is a three-page document and has quite a lot of detail in it, but I am sure that others present—I am not looking at anyone in particular—might wish to come in on this point later, or indeed on later amendments.

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    I mention this because Amendment 33 is again probing the definitions of advice and guidance. There is not much point in going into this in any detail other than to say that we now have more information, which may allow us to get a little further down the line on this. If I am right, the advice now being given is that there are quasi-statutory and statutory definitions which will take us down the road of defining financial advice as an activity that involves a personal recommendation to an individual about a particular course of action, rather than the provision of information about a range of options that may be available to them; and that guidance is generally understood to be any service to support clients making investments that is not advice. That presumably needs to be interpreted for the wider range, with an additional comment on what the definition of debt advice is, which is different to the guidance functions delivered and involves activity specifically regulated by the FCA. I will use those as the basis for the further remarks I will make tonight.

    Amendment 34 ensures that if a member of the public comes to the new body seeking advice from two or more different functions of the body, they will be able to access it if needed, as opposed to only one function. The intention here is that catching someone as they come into the system means that they stay in the system until the advice or guidance that they want is resolved. I think we all agree that that is important, but it is more obvious in the breach than in the observance. The technology has not always been as good at picking up as we might wish.

    The word that is often used in these circumstances is “hot-keying”; in other words, once you have someone on the phone or through a computer system who is engaging with you in the process of trying to resolve their problem regarding any one of the issues that have been dealt with by the SFGB, you do not lose them until you are at least in progress or on a programme—that is, you are informing them or if possible, if it requires more than that, making sure that they stick with it until such time as it is resolved. The amendment is meant to strengthen the arrangements to ensure that we get to the point where we have a seamless approach, however many bodies are involved and however many different operations are required to provide the information, advice and guidance sought.

    Amendment 36 would require the single financial body to work collaboratively with other relevant organisations. Again, this is probably motherhood and apple pie, but the issue here is to ensure that this is given more prominence in the setting up, governance and structures that we have than it appears to be in the Bill. It is not because of any particular suspicion nor because there is a particular concern, because much has been said that we accept to suggest that this is the way in which it is working, but it is not something that can be understressed. This is particularly true in the debt space but it is true in other areas. There are existing bodies of great substance, with long histories, that work well in the areas that they have done and could well be co-ordinated, directed and led in a way that might be improving for the system as a whole, and no one is against that. The idea that this will be done by one body and two others is not the mode that we are trying to address here. We want a collaborative approach, and we think that changing the wording slightly might help. I wait to hear how Ministers respond to that.

    Amendment 37 is slightly different. It points to another issue that has come up, which the noble Lord, Lord Kirkwood, has mentioned: what exactly the relationship is between the SFGB and the bodies that operate either through the Government in Scotland, as happens, or in agencies supported by the assemblies in Wales and—when it is working—Northern Ireland. We need to be given a little more detail than is in the Bill. It is fine to say that the responsibility lies with the SFGB, when formed, to work with those organisations in the national regions, but that does not appear to point in quite the same direction as creating a national structure that serves all citizens even though the way it is done is different wherever they happen to live. The Scottish Government have played a distinguished role in setting up, supporting and developing ideas around this space, particularly the debt space, but they also deal with all problems that people have. There was substantial buy-in from local government and from other areas in Scotland, which is to be commended. It is a bit sad that that has been reduced in recent years. Independent bodies have been set up, many of which are charities and are well regulated by the Scottish Charity Regulator, that deal with the day-to-day operations, and it would be rather annoying—to put it mildly—if the good intentions displayed in the Bill were in any way to disrupt the arrangements up there.

    That has particular resonance when we look at the question of the breathing space, which we have referred to on a number of occasions and to which I hope we will return on Report. It is clear that the breathing space arrangements made in Scotland work well. A way has been developed of engaging with those creditors who operate north of the border that is to their satisfaction as well as that of the consumers, and is run efficiently and effectively by Accountant in Bankruptcy, based in Kilwinning in Scotland. We argue—we have been resisted so far but we hope to overturn this at later stages if we cannot persuade the Government otherwise—that this breathing space is now ready and mature and should be brought down and immediately implemented here. We look forward to further discussions on that. If that is the case, that cements even more the requirement to think carefully about the relationship between the SFGB and the bodies that operate in Scotland, Wales and Northern Ireland.

    We focus on Scotland because Scotland has an advanced way of dealing with these issues. The situation in Wales is different, not because of any practical arrangements but simply because—this is my personal view, although it would be interesting to hear comments from others on it—the intellectual underpinning there borrows more from a more holistic view of deprivation and vulnerability than we see even in Scotland, and certainly in England. A much more holistic approach is easier in a smaller country such as Wales. It involves, almost without exception—without any comment or criticism—a much closer relationship with issues such as housing than you would find in other territories. That is something that we have not really dealt with here but I might commend to those who are looking at this body as to how it might think again about that. Indeed, we have an amendment coming up shortly that might pave the way for further discussion on that issue.

    The situation in Northern Ireland is different again. The Government there are much more active, although obviously in the present situation I am not quite sure who is running things. The arrangements there, although very similar on the ground, are completely different in terms of the bodies involved. Again, we need to respect both how that operates and the way in which it might influence future decisions. I hope very much that the current phrasing of the Bill does not prevent good and constructive engagement with those bodies and organisations in Northern Ireland, Wales and Scotland doing good and productive work that is not necessarily in the same model developed in England.

    While in Northern Ireland, I will also just look south. Obviously we are heading into territory that was well covered yesterday evening, for those of us who were able to listen to the very good debate on the Brexit issues for Ireland. I mention it only because it is increasingly observable in Ireland that there is a movement together of the systems that operate north and south of the border. It is not a hard border at the moment, and long may that remain the case. It is permeable in many different ways, and one of those is the banking and financial systems. It is very important that again we do not try to see this as a UK-only, or even England-only, problem that we need to solve by sitting around and discussing only the issues that come to us because they are close to us. There are different ways of doing things in Northern Ireland but they are not that far apart from what happens in the Republic in relation to the different ways in which people save and borrow. The big difference is credit unions, of which there is virtually no experience of any substance in England, although the situation is better in Scotland and probably less good in Wales. It is a very different mode of operating an activity. Lessons could be learned from that. I put that down simply as a marker of something that we need to think hard about as we go down this track.

    Those are four rather different amendments. We may not resolve the one about advice and guidance today. We will want to come back to some of that, although it is helpful that we now at least have a statement from the Government, however late it was. We need to ensure that we always think hard about how we retain people who approach the system as a whole, and ensure that their problems are not compounded by having different functions doing different things. It probably needs more work than is possible through this amendment but it is a very important issue.

    The need for collaboration has been the basis on which we have made progress in this area, along with the requirement to look carefully at how we operate in Scotland, Wales and Northern Ireland to ensure that we get the best out of the system for the good of the whole. I beg to move.

  1. Baroness Altmann (Con)

    My Lords, I support the amendments. As a passenger behind my noble pilots, I thank the Minister for the helpful letter she sent to me about the issue of guidance versus advice. As the noble Lord, Lord Stevenson, rightly said, we seem to be back to this old chestnut, and I am very pleased that he has tabled his amendment. Perhaps my noble friend has rather missed the point in so far as there is an important element of confusion among the public, which will extend over into the new body if we choose not to address it in the Bill, over what constitutes guidance and what constitutes advice, particularly in the context of debt. This also goes to the point made by the noble Baroness, Lady Kramer, about gaps as far as FCA coverage is concerned.

    This financial guidance body is meant to offer holistic services—the point of Amendment 34 is, rightly, to suggest that if someone needs one element of the financial guidance body, they should be able to be passed straight to another to help them with their particular issues—but the new body sits in the middle of the confusion between the word “advice” and the word “guidance” as they apply elsewhere. In particular, the FCA, the department and the Government have not recognised that the existence of auto-enrolment fundamentally changes the position of individuals when they approach the new body. If someone needs advice on their debt, as defined in the current FCA regulations, it is impossible to take account of whether they should or should not opt out of a workplace pension. That is really important in helping people improve their financial circumstances and deal with their financial position.

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    I beg my noble friends on the Front Bench to take this opportunity to explore once again the issue of guidance versus advice from the point of view of individuals who need to use the service. It will be important for the new body to help people understand what service they will be getting when they come for help, but it is also important that whoever is helping the public has the best possible chance of ensuring that they will understand what is going on. If someone is trying to reschedule their debts and work out a repayment plan, which would be called debt advice, they may ask what they should do about their pension, but the person they are speaking to cannot tell them. That person can send them back to the pensions section, but they also cannot tell them whether to opt out, they will tell them that they need advice, and the person will say, “I have just had advice on my debts”, but they will say, “No, that is different from advice on your pension”. Over time, this will keep coming back and confuse the public.

    I support Amendments 33 and 34, and think that we need to consider the matter in a wider context. I support the idea in Amendment 36 that we need to work collaboratively. The service must work with the financial services industry, charities and the voluntary sector. Perhaps we should also consider asking the new body to work with employers. The more one considers the situation around the country, the more one sees that the workplace could be an ideal conduit to promote the service, not only to deliver financial education and debt management, in some cases, but to signpost people to the new service.

    I am struck by some further figures which, if I may, I add to the debate this evening: 17 million working-age Britons have less than £100 in savings; debt has risen by 25% since 2014; 33% of employees say that debt worries impact on their work—so employers clearly have an interest in helping. Those figures come from a company called SalaryFinance, which helps employees consolidate and manage their debt more cheaply and is making strides as a social business working with employers. Finally, the Money and Mental Health Policy Institute states that people with debt problems are twice as likely to suffer from a major depression. Employers could well make good use of this financial guidance body and perhaps incorporate it into workplace intranets. For the self-employed, we could work with other networks and organisations to ensure that this body is promoted. That takes us back to Amendment 27A, tabled by the noble Lord, Lord Sharkey, to encourage people to use the service rather than just to ensure that it is available.

    I support the amendments and hope that the Government will consider them carefully.

  1. Baroness Kramer

    I will say just a sentence or two, because the noble Baroness, Lady Altmann, has put the case so well. I hope that the Government will take it away to consider it. One of the underlying flaws in the Bill is that it takes a Victorian view that there are people who have debts, who are struggling to deal with them, and others who have investments and need to work out how to maximise them. In this day and age, they are the same people dealing with, from their perspective, a single pot of money which they have in various places or have various issues with. If this is not cleared up in the Bill, the noble Baroness is exactly right to say that we undermine the benefits that the service can bring. It needs to be brought into the modern era. It is good to have a nice legal definition— I should like the MiFID definition, which is in the letter; that makes a great deal of sense—but, as the noble Baroness, Lady Altmann, put so clearly, that does not deal with the perspective of the consumer: where do they stand, what do they need and what on earth is this service providing?

  2. Lord Kirkwood of Kirkhope

    I did not intend to contribute to this debate, but it is a very important issue. The note, which I also received at 3.46 pm this afternoon via the Whips Office despatch, misses the important point about auto-enrolment. That is causing the most concern. The noble Baroness, Lady Altmann, clearly explained how that changes the circumstances. The Government need to continue to work on this. I am not an expert, but, speaking for myself, I would want to test this in the Division Lobby if they cannot come up with a more rational response to the amendment of the noble Lord, Lord McKenzie, and the arguments of the noble Baroness, Lady Altmann.

  3. Baroness Buscombe

    My Lords, I thank all noble Lords for their contributions to this debate, particularly the noble Lord, Lord Stevenson, for introducing Amendments 33, 34, 36 and 37. Straightaway, I apologise that the all-Peers note arrived at only 3.40-something this afternoon.

  4. Lord Stevenson of Balmacara

    According to those with better intelligence than I in the use of electronic devices, it was actually circulated at 10 o’clock but, because it was circulated to our Whips Office, which took a dim view of it, it did not get around until 3.49 pm.

  5. Baroness Buscombe

    I am very grateful to the noble Lord, who has mitigated the situation. Even so, it is very last-minute, and let us put the blame at my door as the Minister responsible. It is important that we try to address this to the best of our ability.

    I can assure all noble Lords that we have spent a considerable amount of time this summer, when perhaps I should have been on the beach, discussing this issue with different people in the industry along with MAS and TPAS. What I hear from consumers and those involved on a day-to-day basis is a very different tale from what I hear from noble Lords this evening. The public have the ability to understand the difference between advice and guidance, but we need to convince noble Lords of that—I appreciate that.

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    I thank noble Lords for the opportunity to clarify the important issues raised by these amendments. I begin by discussing Amendments 33 and 34, which concern guidance and advice; I will then move on to Amendments 36 and 37, which concern collaboration with the financial services industry and the devolved Administrations. Amendment 33 would add an objective for the body to ensure that at every stage of communicating with members of the public about its services, people are clear whether they are receiving guidance or advice. It will, of course, be important that members of the public are aware whether they are receiving financial guidance or financial advice. We discussed the distinction between guidance and advice in some depth in July, and I believe our conversation has highlighted the importance of clarity in this issue. Indeed, we have taken on board the points made by noble Lords, and I have had a number of meetings with officials, who have worked on a detailed information paper, which I hoped would be helpful.

    In the meantime, I do not think that the amendment as drafted is appropriate or necessary. We fully appreciate the risk that members of the public may receive guidance, take it as advice and then go on to make financial decisions when they ought to seek further assistance. However, I can reassure noble Lords that there are already appropriate measures in place to mitigate that type of risk. In fact, I can quote the exact wording currently given to customers by the Pensions Advisory Service and Pension Wise on this matter. In the case of TPAS, clients who ring the helpline will hear a message telling them that it does not provide regulated financial advice and that its service provides generic information and personalised guidance on occupational and private pension-related matters.

    As Michelle Cracknell, the chief executive of TPAS, said to me:

    “We give a simple disclosure: ‘We cannot tell you what to do’”.

    She also said that, as debt advice is defined as a regulated activity, it would be confusing to describe it as anything else in the Bill. She has made that point very strongly, as have others in the industry. When I was sitting with an incredibly experienced, thoughtful and helpful group of people working at TPAS, giving advice to people and working through their systems on the web and on the telephone, I was hugely impressed. They have not had one problem in 34 years with people being confused or complaining about thinking that they were receiving guidance when they were actually receiving advice. It has never been a problem. So we are getting a different story outside, with the user, and we must not underestimate the public, who have the ability to understand the difference between advice and guidance. The whole purpose of this body is to provide a more seamless customer journey so that people can obtain guidance and advice without there being a problem.

  6. Baroness Altmann

    I apologise to my noble friend for intervening, but this is a really important issue. The points she makes are absolutely correct and I do not disagree with them—and nor, I think, would noble Lords around the House—but they are beside the point. When we have a new body it is designed to be holistic. At the moment, Pension Wise deals with pensions, so people will not be confused, and the Money Advice Service, or debt advice, deals with debt. We are trying in this Bill, apparently, to bring everything under one roof. The big change that will not have been relevant over the past 30 years or so, is with auto-enrolment, when people come to the new, holistic single body with a debt problem and need someone to help them with their pension, but the person trying to rescale their debts cannot take that into account. It may well be that we have alighted on a problem that extends to the FCA and the regulatory system—that perhaps the FCA is not concerned enough, in the new environment whereby next year or the year after any worker earning more than £10,000 a year will be in a workplace pension, and debt advice needs to be able to consider the question of whether that person should opt out of the workplace pension. Currently, it cannot do so. It could do, but at the moment there is this regulatory hole.

  7. Baroness Buscombe

    I thank my noble friend for her intervention. Perhaps I am not making it clear that it is not necessarily one person who will be able to give guidance and advice in one session. The point, notwithstanding that it is becoming one body, is that we do not expect a situation in which someone receives all that information from one individual. When someone is in problem debt, for example, and worried about bailiffs, the initial outcome of the debt advice session has to be on stabilising the situation. That may be followed with more in-depth support to understand the root causes of the debt problem and how to address them. It may involve bringing in people who have different types of expertise, depending on the person’s needs. We do not expect that because it is one body—bringing three bodies together—it will necessarily be the same person in one session who gives advice and guidance. As I have learned this summer through visiting these bodies, different people have different kinds of expertise. We want it to be as seamless as possible and provide a more seamless customer journey, but it will not be perfect, given that advice is regulated and guidance is not. However, as there is time pressure on your Lordships’ House, I shall take this issue away and talk again with my noble friend, and the noble Lord, Lord Stevenson, and others to see if we can find a solution to it.

    As I was saying, in my experience of talking to those dealing with this matter on a day-to-day basis, they have every expectation that the new body will be able to cope perfectly well with the definitions as they are. As noble Lords will see from the note that we sent out this morning, there could be some serious confusion and regulatory issues if we changed definitions, so we have to take that into account as well. So it is a tough one.

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    These processes are robust, and we will ensure to the best of our ability that they are carried forward to the equivalent services offered by the new body. In fact, as I said, the Pensions Advisory Service has not received a complaint from a customer that he or she has received regulated advice. We have to make sure that processes are in place to protect consumers who might take guidance for advice in this new body. Those objectives are not specific requirements to do X, Y or Z, but broad, overarching principles and aims to which the body must have regard while exercising its functions. The objectives guide the body in the exercise of its functions; they should not provide a to-do list for the body.

    Amendment 34 would alter the wording of the Bill to add a new objective that would require the new body to signpost appropriately to each of the body’s functions if people need multiple kinds of help. As I have said, the Government agree with the intent behind this amendment. We recognise that members of the public will have overlapping issues which require a mix of advice and guidance relating to debt, money and pensions. The body will be well placed to deliver this seamless service, including through warm handovers and signposting to the different functions it offers. This will be central to ensuring that members of the public receive the personalised, holistic support they need. It is important to remember that one of the key aims of bringing together the functions of the Money Advice Service, the Pensions Advisory Service, and Pension Wise is to improve the co-ordination of these services.

    However, while we agree with the sentiment of the amendment, I do not think that it is required. I have already explained the purpose of the statutory objectives and we expect the body to signpost members of the public to the most appropriate source of help in order to provide a joined-up and holistic service. Having met some of these wonderfully skilled people who have many years of experience in the financial services industry and already operate in this sphere, I can only assume—because of their brilliant expertise and the way that they handle the public and the advice and guidance that they are able to offer—that they will achieve this. The current objectives enable the body to do just that. Indeed, for the reasons given, I believe that Amendment 34 is, with respect, rather narrow and inappropriate to include within the broader objectives specified within the primary legislation.

    I turn now to Amendment 36, which would expand on the final objective, in Clause 2(8)(e), to require the new body to work with the financial services industry, the charitable sector and the voluntary sector when exercising its pensions, money and debt functions. Once again, the Government agree with the sentiment behind this amendment. It will be vital for the new body to work with a range of parties when exercising its functions, and the Government are keen for it to work collaboratively with relevant stakeholders including the charitable sector to ensure that members of the public receive the help that they need. As the noble Lord, Lord Stevenson, said, it is very important that it is collaborative.

    However, I do not believe that this amendment is necessary. The body will work with other organisations on a regular basis, and will not only consult with others on its annual business plan but will work through others when commissioning. In addition, the spirit behind the amendment is captured elsewhere in the Bill. In particular, the body’s strategic function places a requirement on it to engage with the financial services industry and voluntary sectors. The aim of this function is to ensure that individual efforts to improve financial capability and tackle problem debt become more than the sum of their parts. The strategy will aim to better identify the issues that people face and where there are gaps in provision; to develop evidence-based solutions; and to ensure that the sector’s resources are used in a co-ordinated and effective way.

    Noble Lords have heard my response to Amendment 36 and I take this opportunity to explain why the Government have chosen to place a specific requirement on the body to work with the devolved authorities beyond the requirements of the strategic function. The devolved authorities will have their own priorities for their populations and, as such, it is necessary that the new body works with them to ensure that different services continue to fit together. It is for this reason that the objective in subsection (8)(e) places a requirement to work with Scottish Ministers, Welsh Ministers and the Department for Communities in Northern Ireland. As noble Lords know—and have said—responsibility for administration of funds for debt advice will lie in the hands of the devolved authorities when the body is operational. This is a deliberate departure from current practice and creates an opportunity for the devolved authorities to align debt advice provision with other locally administered guidance and advice services. The Department for Communities in Northern Ireland, for instance, currently delivers guidance on housing, mortgage debt advice and welfare reform, while the Scottish Government were recently given responsibility for the delivery of consumer advice and advocacy relating to post, electricity, product standards and oil and gas.

    Given the administrative change to the delivery of debt advice, we believe that it is especially important that the new body works closely with the devolved authorities in forthcoming years. Close collaboration will enable the exchange of knowledge and will help to ensure that information and examples of good practice are shared across England, Scotland, Wales and Northern Ireland. While there are differences across the nations, there are also similarities in the problems faced by members of the public when managing their finances and, as a result, many of the lessons that will be learned by the new body will therefore apply across the United Kingdom. It is for this reason that we have explicitly legislated to encourage a collaborative working relationship across the nations, placing an additional requirement in the new body’s objectives beyond the strategic function.

    I turn lastly to Amendment 37, which would require the Secretary of State to undertake periodic reviews of the single financial guidance body to determine its effectiveness in Scotland and Northern Ireland. I do not believe that this amendment is necessary. The body will provide a UK-wide service for pensions and money guidance on the basis of common objectives and standards. It will also liaise with the devolved authorities on the provision of debt advice. Like any other body providing services to the public, monitoring the effectiveness of its service wherever it is delivered will be a routine, good-governance activity. The body’s board will want assurance that the services provided to the public are effective. The effectiveness of its services will be integral to the assessment of the body’s performance. As part of its regular accountability reviews with the chief executive, the DWP will require the body to provide assessments against key performance indicators, including how effective its services are in different regions of the UK. Following the end of the financial year, the body will produce an annual report which will cover the body’s activities in relation to its functions. The annual report will be laid in Parliament. I believe that the arrangements I have outlined will provide robust mechanisms for understanding the effectiveness of the body in meeting its objectives throughout the UK.

    I thank the noble Lord, Lord Stevenson, for these amendments and all noble Lords, particularly my noble friend, for their contributions to this debate. I hope that I have been clear that, while I understand the intention behind these amendments, the Government’s position is that they are unnecessary and may be overly prescriptive to enshrine in primary legislation. As such, I urge the noble Lord not to press Amendments 34, 36 and 37—I mean 33, 34, 36 and 37.

  1. Lord Stevenson of Balmacara

    I am very grateful to the noble Baroness, Lady Altmann, and the noble Lord, Lord Kirkwood, for their support and for opening up the debate, in particular on Amendment 33. I thought that the Minster made a bit of a Freudian slip there, because she wanted me not to press Amendments 34, 36 and 37 and then realised that she should have included Amendment 33. In fact, I do not think that is what she meant—she means that we need a further discussion on this.

    There is a really important issue that we want to sort out. The current regulatory phraseology may fit the legal requirements of the current situation but, as the noble Baroness, Lady Altmann, said, the game’s a bogey—that is a Scottish expression. It is no longer as it was; we are in a different world now with auto-enrolment and all the ways in which technologies are coming forward. Fintech is the word on everybody’s lips in the sector. We need to think harder about future-proofing the current legislation. At its heart, sadly, this problem is probably of the Government’s own making. Had they decided to stick with the two-body solution, we would probably not have had this problem, because we could then have had different regulatory structures for debt and for pensions or other activities. Because they have been bolted together, however, the issue is not going to go away.

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    If we are to have an integrated, warm-key, hot-key, all-singing, all-dancing issue, we need to face up to it and be very clear about it. It may be true that the people the Minister talked to did not have difficulties with this, but I can tell her that, out there in the country, people do not follow you when you start talking about regulated and non-regulated advice. In the regulated pensions area, if it is possible that regulated pensions advisers cannot tell people what to do, but it is also possible that regulated debt advisers can tell them what to do—it happens—then we have a problem and we need to resolve it. If we are to be seamless, why settle for less than that? We should get it right but, with that, I beg leave to withdraw the amendment.

Amendment 33 withdrawn.

Amendments 34 to 40 not moved.

Clause 2 agreed.

Amendments 41 and 42 not moved.

House resumed. Committee to begin again not before 8.39 pm.